After learning how to read basic candlestick charts, the next step is exploring common chart analysis techniques. These tools help traders and investors identify patterns, trends, and possible entry or exit points.
Here are some of the most widely used methods in the crypto world — simple enough for beginners to start with.
1. Support and Resistance
Support is a price level where the asset tends to stop falling — buyers step in.
Resistance is where the price often stops rising — sellers take profit.
These levels often repeat historically. Once resistance is broken, it may turn into new support (and vice versa).
Example: BTC bounces near $25,000 multiple times = strong support zone.
2. Trendlines and Channels
A trendline is a diagonal line drawn along ascending or descending price points.
It helps identify the direction of the market:
- Uptrend = higher highs and higher lows
- Downtrend = lower highs and lower lows
Price channels are formed when two parallel trendlines create a path where price moves between them.
3. Moving Averages (MA)
Moving averages help smooth out price movement. Common types:
- Simple Moving Average (SMA): average price over X days
- Exponential Moving Average (EMA): gives more weight to recent prices
Popular MAs used in crypto:
- MA 20 (short-term)
- MA 50
- MA 200 (long-term trend)
Crossovers like Golden Cross (MA 50 crossing above MA 200) and Death Cross (reverse) are popular trend signals.
4. Relative Strength Index (RSI)
RSI is an oscillator that ranges from 0 to 100:
- RSI above 70 = overbought (price may drop)
- RSI below 30 = oversold (price may bounce)
It’s useful for spotting possible reversals or confirming trends.
5. MACD (Moving Average Convergence Divergence)
MACD compares two EMAs (usually 12-day and 26-day):
- MACD Line and Signal Line generate crossover signals
- Histogram shows momentum strength
Used to confirm trend direction and strength. A rising histogram often means bullish momentum.
6. Candlestick Patterns (Basics)
Even without indicators, candlestick shapes can give clues:
- Doji: indecision in the market
- Hammer: potential bullish reversal after a downtrend
- Shooting Star: potential bearish reversal after an uptrend
- Engulfing: strong reversal pattern
These are more powerful when they appear at key support or resistance levels.
Final Tips
- Don’t rely on a single indicator. Use 2–3 tools together for confirmation.
- Combine chart analysis with market context (news, sentiment, volume).
- Always zoom out to higher timeframes before making decisions.
Chart analysis is not magic — it’s a way to improve your probabilities, not to guarantee the future.