Technical Analysis in Crypto

Reading Crypto Charts

The most common way to visualize market data is through charts. Each type provides a different level of detail:

● Line Charts represent the simplest format of price tracking over time, typically showing price over time based only on closing values.

● Candlestick Charts are standard in crypto trading. Each “candle” shows the open, high, low, and close prices within a specific time period (in stock trading, the time period is often one day; in crypto trading, the time period can be as short as one hour). Patterns formed by candles often signal market sentiment and, therefore, can be acted on by traders.

● Volume bars are positioned below a chart, showing how much of an asset was traded during that period and whether it closed higher or lower than when it opened. Rising asset prices supported by high volume are considered strong buying signals, while rising prices and low trading volume are considered a weak buying signal or sign of a potential reversal. Downward movements in price also follow the same logic.

Learning to read candlestick charts and volume is often the first step for traders before moving on to more advanced indicators.

Common Technical Indicators

Indicators are mathematical tools applied to charts to highlight patterns and trends. Some of the most widely used include:

● Relative Strength Index (RSI): Measures momentum on a scale from 0 to 100. Readings above 70 suggest an asset may be overbought, while readings below 30 suggest oversold conditions.

● Simple Moving Averages (MA): Smooths out price fluctuations to show broader trends. Crossovers between MA lines, like the 50-day MA crossing above the 200-day MA, can signal a bullish sentiment, while the 50-day MA crossing below the 200-day MA signals a bearish sentiment.

● Moving Average Convergence Divergence (MACD): Compares short and long-term exponential moving averages to identify potential sentiment changes. When the MACD crosses its signal line, traders can evaluate both the direction of the crossover and the widening or narrowing gap between the lines to gauge momentum strength and potential trend shifts.

While these indicators should not be used solely to direct your trades, they can provide context when combined with chart patterns and trading volume data.

Support, Resistance, and Breakouts

Markets often move within price ranges, and we can often see these ranges by looking at price charts. Support levels are price points where demand has historically been strong enough to stop declines, while resistance levels are where selling pressure has capped upward moves.

When prices break through support or resistance with strong volume, it can signal the start of a new trend. However, false breakouts are common in crypto due to high volatility. Waiting for confirmation through volume or multiple time frames helps reduce the risk of acting on noise.

Beyond Charts: Sentiment and on-chain Data

Technical analysis alone does not explain every move in crypto. Unlike equities, where fundamentals play a larger role, crypto is influenced heavily by sentiment and blockchain-specific data.

● Social sentiment: Activity on platforms like Twitter, Reddit, or Telegram can drive short-term demand. Tools such as LunarCrush track these trends.

● On-chain analytics: Because transactions are recorded on public blockchains, data such as wallet activity, token distribution, or whale movements can be analyzed. Services like Glassnode, Nansen, or Dune provide insights that go beyond charts.

Combining chart analysis with sentiment and on-chain data gives a more complete picture of what drives price action.

Tools for Technical Analysis

For beginners looking to learn more about TA and start tracking price movements themselves, you can use these tools to get started:

● TradingView: A popular charting platform with free and paid tiers.

● CoinMarketCap and CoinGecko: Offer basic charting alongside market data.

● On-chain analytics tools: Glassnode, Nansen, and Dune provide blockchain-level insights, often on a subscription basis.

Exploring free tools first is often the best way to build familiarity before investing in advanced platforms.

The Bottom Line

Technical analysis is not meant to guarantee outcomes, but it can help guide your decision-making in markets where volatility and sentiment drive rapid change. By learning how to read charts, apply indicators, and consider both sentiment and on-chain data, investors can better navigate short-term price action in crypto.

In the next chapter, we’ll move beyond charts to examine tokenomics and project fundamentals, the underlying design and health of a cryptocurrency project that determine its long-term value.