Crypto markets can move with rapid pace and the charts tend to look intimidating at first, especially when you’re seeing candles, wicks, indicators and volume bars all at once. The good news is that cryptocurrency technical analysis can help you make sense of those charts by studying historical price action and trading activity. In other words, it’s a way of interpreting what the market has done (and how it’s behaving right now) rather than relying on guesswork generated from headlines alone.
Mastering the art of reading crypto charts also helps you understand the language and jargon that traders use, like bullish (prices moving up) and bearish (prices moving down). Importantly, bullish and bearish moves don’t always happen in a straight line. Crypto can see sharp short-term pullbacks inside a larger uptrend or short rallies inside a broader downtrend, which is why technical analysis is usually about probabilities and preparation, not certainty.
It’s also worth setting some expectations early on. Even the most in-depth technical analysis can’t predict sudden news, exchange outages, government announcements, ‘whale’ trades and other shocks that are inherent in crypto markets. But when it’s used well, it can help you structure your trades and steer you away from emotional decision-making.
If you’re trading crypto as CFDs, make sure you understand the product first – here’s a guide to learn more about crypto CFDs. And for the foundations of charting, start with this introduction to technical analysis. You can also explore CMC Markets' crypto CFD offerings at any time.
How candlesticks work in crypto charts
Most platforms use candlesticks as their default, largely because they pack a lot of information into a small space. If you’re learning candlestick charts in crypto, take some time to learn the basics first – namely, what each candle shows and what the ‘shape’ of the candle says about buyers and sellers during that period of time.
So, what are candlestick charts and how do they work? A candlestick has two main parts:
The body shows the open and close price for the period (e.g. a 15-minute candle or a daily candle).
The wicks (aka shadows) show the highest and lowest prices hit during that period.
A ‘green’ or hollow candle means the close was higher than the open, whereas a ‘red’ or filled candle means the close was lower than the open. The body size gives a quick read on momentum. In other words, larger bodies show stronger directional movement and small bodies show indecision.
Wicks are especially important in crypto because they show volatility and rejection. A long upper wick can mean price pushed up, but sellers stepped in and forced it back down. A long lower wick can mean price dropped, but buyers absorbed selling pressure and pushed it back up. Neither of these is a guaranteed reversal signal on its own, but wicks are handy clues when combined with trend and volume.
Here are a few beginner-friendly interpretations:
Short upper wick on an up candle: Buyers stayed in control into the close.
Long upper wick after a rally: Buyers tried to push higher, but sellers resisted. This is sometimes a warning sign if it shows up repeatedly.
Long lower wick after a sell-off: Sellers pushed down, but buyers defended that level, which could be a sign of support.
Bear in mind that these signals matter even more with crypto CFDs because leverage can cause outcomes to be even stronger, for better or worse. A candle with long wicks tells you that the market is swinging sharply inside the period, so your risk controls are all-important.
To make better sense of this, pull up a major crypto pair and watch how candles form around important levels. You can view price action and chart behaviour, for example, when you trade Bitcoin USD CFDs.
Understanding volume in crypto trading
Volume is one of the most commonly used tools in technical analysis, yet it’s often overlooked. In crypto markets, volume can help traders assess whether a price move has real conviction behind it or whether it may instead be fragile.
Volume appears as bars at the bottom of most charts. ‘Volume’ itself is the number of units traded within the period. You might also hear about things like ‘dollar volume’, which multiplies price by volume to help you compare activity across different price levels. Here are some tips to keep in mind:
High volume can confirm a move: If price breaks higher and volume jumps, it could mean stronger market participation (i.e. more buyers agreeing with the move).
Low volume can be a warning sign: If price drifts higher on weak volume, it could mean fewer participants are supporting the move, which in turn makes it more vulnerable to reversal.
Volume spikes link to catalysts: Announcements, listings, macro headlines or sudden liquidations can cause bursts of activity.
A good way to use volume as a beginner is to combine it with candlesticks. A long upper wick plus a big volume spike, for instance, can sometimes suggest heavy selling pressure. Also, a breakout candle with rising volume can be more meaningful than a breakout on quiet volume.
One nuance in crypto is that markets can be fragmented across venues and activity can shift far quicker than you might expect. That’s also why arbitrage can exist, although it’s usually competed away quickly by professional participants. For beginners, the key takeaway is to treat volume primarily as a confirmation tool rather than relying on it in isolation.
Moving averages: spotting support, resistance and trends
If you want a basic indicator to help filter out noise, moving averages in cryptocurrency can be good starting point. A moving average smooths out price data over a set period of time so you can better see the underlying direction. Keep an eye out for:
Simple moving average (SMA), which gives equal weight to each data point in the lookback period. It’s smoother and slower to react.
Exponential moving average (EMA), which weights recent prices more heavily, so it responds faster to new moves.
Most traders – especially experienced ones – use moving averages in three ways.
1. Trend direction
If price is generally above a moving average, traders may interpret conditions as more bullish. But if price is below the MA, conditions could be more bearish.
This isn’t a guarantee, though. Price can chop and change around a moving average in sideways markets, but it’s a fast way to frame the chart.
2. Dynamic support and resistance
Moving averages act like ‘dynamic’ levels where price pauses, bounces or rejects. In a strong uptrend, price could pull back towards an EMA and then continue higher. In a downtrend, rallies up into an MA might stall.
It’s one reason why some traders watch longer moving averages (like 50-day or even 200-day) on higher timeframes. Longer periods are usually watched more widely and that can make them more relevant as reference levels.
3. Crossovers
Crossovers compare a faster-moving average to a slower one. As an example, if a shorter EMA rises above a longer SMA, some traders will read this as improving momentum. If it crosses below it, they might see it as weakening momentum. Just remember that moving averages are lagging indicators. In other words, they show you what has happened, not what will happen next.
A good way to practise is to test these concepts on major pairs where there’s solid liquidity. You can apply moving averages and see how they behave on charts when you trade Bitcoin USD CFDs or, instead, when you trade Ethereum USD CFDs.
