So you have bought your bitcoins, time to hop onto the website bitcoinwisdom.com and stare at the price right? We all know that’s what ends up happening, so we thought we would give you a bit of a breakdown on how to read price charts. We will take you from novice to… not as novice as you previously were!

The fundamentals

Support and Resistance

This shows you how many orders are on the book at current and help predict the future price.

These are the high and low limits of the price in the near future. If you can determine these points correctly you will know the right times to buy and sell.

Support

Represented as the red line, this is the price’s that traders are willing to buy coins for. This will always be lower than the spot price.

Resistance

Represented as the green line, this is how much people are willing to sell their coins for. This will always be higher than the spot price.

The green line is existing orders on the exchange, these are order of coins for sale (the resistance). The red line is orders to buy coins (the support). The depth of the lines represents the amount of coins at that price on the exchange. Often referred to as a “wall”, the larger the wall, the more coins needed to push beyond it.

If you can determine the correct area of support, you know when the price will (probably) stop crashing, vice versa, if you sell at the point of heavy resistance, the price has probably reached a short term maximum. Understanding the Support and Resistance is very useful!

Moving Averages

By default there are two different Moving average lines displayed on bitcoinwisdom (Blue = moving average over the last 7-days, Orange = 30-day). These are important metrics, when the two lines cross over it generally indicates a change in the sentiment and direction of the markets.

Moving Averages Crossover

When the moving averages intersect, the price is either valued higher or lower in the short term than it has been over the longer term. Eg. If the 7-day moving average (Blue) is above the 30-day moving average it could represent a fundamental re-evaluation of the value of the asset, as it is now being valued higher over the shorter term than it has been over the longer term.

Candlesticks

Candlesticks are the nickname for the thick bars, these represent orders over a given time frame (15 minutes for example). Their colour represents whether the price has moved up (green) or down (red) during that given time frame.

The verticle lines extending from the solid bars represent the high and low trading price for that given time period. Whilst the thick bar represents the opening and closing price for that time period.

Because a green bar represents a price move upwards, the bottom of the thick bar represents the opening price and the top represents the closing price for that given time frame. It is reverse for red candlesticks, where the top represents the opening price and the bottom is the closing price.

Moving Average Crossover Divergence – MACD

MACD is a momentum indicator, the numbers are defaulted to 12, 26, 9, 2 for bitcoinwisdom.

The first number is the short Estimated Moving Average (12 candles), second is the long Estimated Moving Average (26 candles), the third number is the Signal line (the orange line is the signal line whilst the blue line is the MACD line), the fourth number represents the Multiple of Histogram which is simply used to make the histogram more visible.

The bars represent the differences between the MACD line and the Signal Line. E.g. when the divergence between he two lines is greater the bars of the histogram will be higher. When the MACD line is above the Signal line the bars will be green and vice versa when red. This metric functions similarly to the Moving averages by giving you a measure of the difference between sentiment’s over different time periods but is measured as differences between two time periods (12 and 26 candles by default) opposed to just time periods. For more information check out this video

The most important part of the MACD indicator is when the two lines crossover, when the blue line crosses over the orange line this is called a bullish crossover which represents a bullish price move (price move upwards) inversely when the orange line crosses over the blue line this is a bearish crossover, meaning the price will probably decrease. This is a good way to determine which way the price is going to move although MACD is considered as a lagging indicator, meaning, the indicator only shows you what has already happened to the price and is better used to confirm your existing predctions.

Ask/Bid and Current Price

The Prices above and below the current price (in red) are called the order book. The above orders are ‘asks’ and below are the ‘bids’. The ‘Asks’ are the prices of orders people have place wanting to sell coins for ( therefore above the current price). The ‘bids’ represent the prices of orders placed on the exchange that people are willing to buy coins for(therefore below the current price).

The first column represents the price of the ask or bid (in yen in this example), the second column represents the amount of bitcoins at that specific order price.

The far right column represents the amount of bitcoin for sale at a higher price which are consolidated into whole dollar amounts (eg. 434 bitcoins need to be purchased to reach the price of 1590 Yen). These prices also represent all the orders in between, so the 1590 mark represents all orders from 1580.01 – 1590 Yen.

Latest trades

This represents the last orders that have been filled by the exchange. Green representing an order moving the price up whilst red represents an order moving the price down.

Volume

This represents the number of bitcoins traded for an associated candlestick. Green corresponding to a price increase for the given time period and red representing a price decrease. These bars are coloured to remain consistent with their corresponding candlesticks. The yellow number indicates the current volume for the present time period.

We hope this have given you a greater insight into the information displayed on exchanges. With our tutorial, you are now better equipped to read the markets, buy and sell at the right time, or at least make your friends think you know what you’re doing!