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How to Read and Analyze Charts

May 8, 2023


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After building up a decent knowledge of candlesticks, it is now time to expand into other key areas of charts. Apart from candles, which showcase price movements, there are other elements that can be seen on every basic chart.

The image shown above is a basic chart from TradingView, a leading charting platform. There are quite a few elements that might seem overcomplex to the untrained eye, but with due time you will realize that the interface is easy to understand. There is nothing to fear as the chart shown above is modest in terms of the tools that it offers.

The first notable elements are the X and Y-axis. While X shows the time passed since each candle, the Y-axis shows the direction of the price. If prices increase compared to the previous candlestick, the next one turns green. If the opposite is true, the chart spawns a red candle.

The first section notably contains settings which include a trading pair, timeframe, and candle type.

While not viewable on TradingView, charts on exchanges provide a section with the trading pair’s order book. This section also tends to contain basic information in regards to daily traded volume and price performance.

The surface of the chart itself showcases a number of important data points. In the upper left corner, we see the name of the trading pair, active timeframe, and exchange. Below it are the indicators used to show market data on the chart, such as volume, EMA lines, and VWAP.

Below the candles, at the bottom of the main chart, we see candlesticks for volume. When hovering over a specific candle, it is possible to see the amount of volume traded for that specific timeframe.

Below volume, we have the iconic RSI indicator, which is used by investors in both traditional and decentralized finance. RSI is an indicator of how overbought or oversold an asset is. Anything between 30 and 70 is a safe zone, while RSI above and below these levels indicate a potential reversal.

For example, an RSI over 70 implies that the asset is overbought. In that case, it is likely for investors to start selling. The same can be applied inversely if RSI falls below 30. When drawing trendlines on RSI levels, investors can discover hidden bearish and bullish divergences, a commonly-used pattern that we will cover in another lesson.

Apart from RSI, other popular indicators include:

  • SMAs
  • EMAs
  • Bollinger Bands
  • Ichimoku Cloud
  • Elliot Waves
  • Fibonacci levels

Investors limit themselves to only two indicators and one trading style. However, certain market participants are experimental and combine different indicators and styles to find the best possible combination for ongoing price behavior.

As a matter of fact, it is not even strange to see traders rely purely on establishing price levels with horizontal and vertical trendlines. For the best experience possible, we recommend testing all reputable styles with paper trading before venturing out into the real market.

About The Author:  
Marko is a crypto enthusiast who has been involved in the blockchain industry since 2018. When not charting, tweeting on CT, or researching Solana NFTs, he likes to read about psychology, InfoSec, and geopolitics.

More Lessons in

Crypto Investing Guide: Technical Analysis