How to analyze crypto assets: main types of charts and tools for successful trading

Why Charts Are the Key to Strategic Decisions in Cryptocurrency Trading?

For those aiming to profit from fluctuations in the price of Bitcoin and other digital assets, understanding how to read market signals becomes critically important. Cryptocurrency charts are not just pretty lines on a screen; they are the language of the market, telling a story about investor psychology and future price movements. Learning to recognize characteristic patterns and indicator combinations can significantly increase the chances of profitable trades.

According to the fundamental Dow Theory, the market has a three-tiered trend hierarchy:

• Primary trend - spans months or even years
• Intermediate trend - develops over weeks and months
• Short-term trend - relevant up to 10 days

Each of these plays a role when choosing the time frame for trading.

What Types of Charts Are Used in Cryptocurrency Trading?

Simple Line Chart

The most basic visualization form is the line chart, which connects closing prices in a continuous line. This option is ideal for beginners, as it instantly shows the overall trend without extra details. The time scale is at the bottom, and the price scale is on the sides.

However, this simplicity has a drawback: the line format conceals critical information about the range of fluctuations and the internal price dynamics over the selected period. For in-depth analysis, this display is insufficient.

Japanese Candlesticks - the Most Informative Format

The candlestick format is considered the professional standard for technical analysis. Each candlestick reflects a complete price cycle over a specific period: opening point, closing point, high, and low.

The candlestick structure consists of two parts:

• Body - shows the spread between opening and closing prices
• Upper and lower shadows - demonstrate the extreme levels reached by the price

Color coding reflects the direction of movement: if the price increased from open to close, the candle is green; if it decreased, red.

Long lower shadow often indicates active accumulation pressure — traders buy the asset during a price dip, trying to establish a bottom.

Solid green body with minimal shadows shows confident bullish momentum, with buyers controlling the situation. The opposite — red, solid body — indicates bearish control.

Unresolved battle between buyers and sellers is marked by a doji: a minimal body with long shadows on both sides. The appearance of such a pattern often precedes changes in the main trend.

Recognizing Trading Signals Through Patterns

Years of trader practice have identified dozens of recurring patterns signaling potential reversals or trend continuations. They are conditionally divided into three groups:

• Patterns indicating a reversal upward
• Patterns indicating a reversal downward
• Patterns predicting trend continuation

( “Hammer” - the First Signal of Possible Growth

This single-candle pattern appears after a decline. The price starts below the open level but actively recovers during the session, closing near the initial mark. On the chart, it looks like a hammer with a long lower shadow )and a small body###.

The key condition is that the next candle must close higher, confirming a new dynamic reversal. This pattern is especially reliable when it appears within a clear downtrend.

( “Hanging Man” - Warning of Possible Drop

Externally similar to the hammer, but appears at the top of an uptrend. A minimal or absent upper shadow with a long lower shadow signals that demand cannot sustain the price at its peak. According to researcher Thomas Bulkovski, confirmed this pattern precedes a decline in 70% of cases.

) “Shooting Star” - Clear Sign of Weakening Uptrend

A long upper shadow with a minimal body and a short lower shadow shows that although the price rose, buyers could not hold the position. It’s important to wait for the next candle: if the new high does not exceed the pattern’s high, it confirms a bearish reversal. If the price continues to rise, it was a false signal.

Technical Indicators That Reveal the True Strength of a Trend

Visual analysis alone is insufficient. Additional tools are needed to quantitatively measure various aspects of market dynamics.

( Moving Average )MA### - the Foundation of All Complex Analyses

This indicator averages out price noise over a chosen period, revealing the true trend direction. The most popular calculation periods are:

• 10, 20 days — for short-term trading
• 50, 100 days — for medium-term tactics
• 200 days — for long-term positioning

There are three variants: simple ###SMA###, exponential (EMA), and weighted (WMA). When the 50-day and 200-day moving averages cross downward, a so-called death cross (“death cross”) forms, traditionally preceding sharp price declines. Such a scenario unfolded for Bitcoin on June 19, 2021.

( Volume Indicator )OBV( - the Driver of True Price Movements

OBV measures accumulated trading volume, considering the price direction. Increasing volume during stable prices indicates hidden accumulation pressure that will soon break out upward. If large players’ profits accumulate during consolidation, it signals explosive growth.

) Relative Strength Index ###RSI( - Measures Overbought and Oversold Levels

RSI ranges from 0 to 100:

• Values >70 indicate overbought conditions, where sellers prepare to take control
• Values <30 show panic and oversold conditions, often preceding recovery
• Zones 30-70 are considered neutral

) Bollinger Bands ###BB( - Detecting Abnormal Volatility

A set of three lines:

• Central line )20-day SMA###
• Upper band (mean + 2 standard deviations)
• Lower band (mean - 2 standard deviations)

When the price moves beyond the upper band, the asset often enters overbought territory. When it drops below the lower band, oversold conditions are observed. Band expansion indicates increasing volatility; narrowing suggests a potential breakout.

( Order Book )DOM( - The Real Architecture of Demand and Supply

This tool reveals active buy and sell orders in real time. The more orders on both sides, the deeper the market, and the less likely a single large trade will disrupt it. Order imbalance often precedes sharp price swings.

Practical Tips for Successful Trading

To move from theory to profits, follow this algorithm:

1. Learn to recognize basic chart types and understand the information they convey
2. Study characteristic patterns for different market phases — rise, fall, consolidation
3. Always cross-verify chart signals with additional indicators
4. Set entry and exit rules before you start trading
5. Practice discipline: if pattern conditions do not match perfectly, skip the trade

The cryptocurrency market remains one of the most provocative for speculation, but even basic technical analysis knowledge gives traders a significant advantage over those trading “by feel.” Different chart types and indicator systems are your compass in the labyrinth of volatility and uncertainty.