In this article, we will focus on how to read crypto charts for beginners to make better decisions as a day trader or crypto investor. We all know that charts are very technical and it’s more of an art than an exact science. Chart reading and crypto trading with stop loss are powerful tools for any trader.
We are going to leave all the old sayings and focus on something new that will help you make better decisions when you are reading crypto candlestick charts. After reading this guide you will be able to make better decisions and also have a better idea of where the market might be heading in the short-term or longer-term future.
Cryptocurrency traders study candlestick, bar, or line charts to make predictions based on previous price movements and there are thousands of different techniques. Together with these charts, they utilize technical indicators, chart patterns, and different timeframes to gain insights into the upcoming minutes, days, or perhaps weeks.
But what makes a chart predict the future of bitcoin or an altcoin?
After reading a lot of cryptocurrency and bitcoin charts, I would say that the most predictive aspect is being able to generate a picture and a plan for the coin you are analyzing. This might sound confusing at first but in this guide, I will help you understand all this and you will be able to make better price predictions on your own with a new set of skills.
Here is all the content in this article, feel free to skip sections by clicking the links or read through the whole guide:
- Different kinds of crypto charts
- How different traders read cryptocurrency charts
- Cryptocurrency chart patterns explained
- How to read cryptocurrency and bitcoin candlestick charts
- How to read different time frames
- How to read technical indicators
Which are the different kinds of crypto price charts?
When reading crypto charts it pays to understand which kind of cryptocurrency price chart you should use. All of them serve different purposes and it’s not always wise to use the same tool for different goals.
I would say that active traders are better off using bar charts while longer-term investors benefit from using line charts and similar.
Here is a table of the most common graphs:
| Type | Characteristics | Best for | Software |
|---|---|---|---|
| Candlestick | * Detailed | Short-term traders Swing traders | BitMart FTX.US Kraken |
| Line | * Objective | Swing traders Investors | FTX.US EXMO Beaxy |
| Bar | * Detailed * Objective | Short-term traders Swing traders Investors | Bitpanda Coinfield Binance |
| Area | * Objective | Swing traders Investors | Phemex NDAX.IO Gate.io |
| Heikin Ashi | * Objective | Swing traders Investors | Gate.io NDAX.IO EXMO |
I will go through each type of the different kinds of crypto price charts to give you an idea of what they are used for and give you some ideas of how you can use them yourself when you are reading the chart of your favorite altcoin. For illustrative purposes, I will use Bitcoin for each chart.
Candlestick
The cryptocurrency candlestick chart is the most common version when learning how to read crypto charts and it’s one of the most used charts for analyzing crypto price movements and technical indicators. The reason why it has become so popular is the fact that it does a great job of giving the information that we need, which are:
- Different time frames
- Detailed price development
Below is a representation of the 1hour candlestick chart of Bitcoin.
Important!
Remember to use several different time frames when analyzing cryptocurrencies with a candlestick chart. Different time frames tell different stories about the market. To make the most accurate price predictions you need to see the market from several angles.
The settings are the following:
- Green candles = Positive price movement
- Red candles = Negative price movement
- Each candle = 1 hour
This type of cryptocurrency graph can be used by both active day traders but also long-term investors which makes it very versatile.
| Pros | Cons |
|---|---|
| Great for both traders and investors | Very subjective to price patterns |
| Gives detailed information about the price | Traps many traders into false setups |
| Most modern analysis methods are based on candlesticks | |
| Very easy to learn |
Line
Cryptocurrency line charts are most used by longer-term investors who are looking for an objective picture of the market as a whole. The reason most investors use this type is that it smooths out price details and only shows the closing prices instead of all the wicks that the candlestick shows.
It is less detailed but it does a great job of showing longer-term trends and is perfect for investors who are looking a the bigger picture.
The most important aspects of the line chart are:
- Objectivity
- Longer-term trend
- Big picture
Below is the same representation of the 1 hour Bitcoin price development but now with a line chart.
Important!
The line chart is the best way to objectivly look at the bigger picture of a market. Analyze the longer-term trend without any smaller details. Most great investors use the line chart thanks to it’s objectivity and clutter free nature. Try it out even if you are a day trader looking for a daily setup.
The settings are the following:
- One line represents the closing price
When crypto day traders have more experience they should give the line version a try to spot bigger-picture trends before they start the trading day.
| Pros | Cons |
|---|---|
| A good tool for long-term investors | Does not show detailed price movement |
| Very objective with few details | Can confuse short-term traders |
| Easy to understand for all investors | |
| Most charting software has it as a standard option |
Bar
The bar chart in crypto is very similar to the candlestick version except for one detail, there is nobody on each separate candle. This makes it a more slim version and it’s also considered to be a little bit more objective since there are fewer details.
In my opinion, it is more helpful for swing traders but can also be used by investors who are looking at detailed areas of the price. One special thing is that this version is mostly shown in black and white to further remove any distractions. By doing this you will have a very naked picture of how the market has been moving.
It gives us the same information as the candlestick graph:
- Detailed price development
- Different time frames
Here is an example of the 1-hour price movement of bitcoin using a standard bar chart.
Important!
Use the bar chart when you want a more objevtive picture of the coin you are analyzing with less clutter. It will easily show you areas of consolidation and at the same time separating break-outs and trends very well with less details. This crypto graph will help you see the price in different sections.
The settings here are the following:
- Green bars = Positive price movement
- Red bars = Negative price movement
- Each bar = 1 hour
It is not as well known as other graphs but it truly is a powerful tool when you want to remove some details from the price you are analyzing.
| Pros | Cons |
|---|---|
| Can be used by both traders and investors | Not optimal for day traders who are used to more details |
| Shows a less detailed version of the candlestick graph | |
| Easy to understand | |
| Very objective graph |
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Area
The area graph is in my opinion just another version of the line graph and they both serve the same purpose when reading cryptocurrencies. It is more suited for longer-term investors who are looking for bigger trends.
It puts more emphasis on the highs and lows due to the color arrangement but that is the only difference. I can imagine if you learn how to use it well it can serve as a good tool signal when prices are too low or too high.
The important aspects of this graph are:
- Most suited for investors
- Objective
- Focus on the bigger picture
Important!
It’s easy to get confued with the color arrangement and use it more as an RSI indicator. If you are sensetive to these kind of factors try to avoid using this graph when reading cryptocurrencies.
The settings here are the following:
- One line represents the closing price
| Pros | Cons |
|---|---|
| Best suited for swing traders or investors | More confusing than the standard line graph |
| Very easy to understand | Not many guides teach how to use it |
| Great tool if the color arrangement is used well |
Heikin Ashi
The Heikin Ashi graph is not very common amongst cryptocurrency traders but I still want to highlight it because it has some great attributes that you can benefit from depending on your investment approach. To summarize what it’s all about, it is a Japanese graph and the direct translation means “average bar” in the Japanese language.
One of the most effective use cases of the Heikin Ashi graph is to know whether or not a trend is intact, this works for both long-term and short-term trends. The bars look the same as the candlestick version but it puts more emphasis on the actual trend and disregards minor pullbacks in the opposite direction. It is mostly used in the commodity and futures market but can absolutely be applied to cryptocurrencies.
Some important aspects about the Heikin Ashi graph:
- Green candles without bottom wicks indicate a strong uptrend
- Red candles without a top wick indicate a strong downtrend
- Candles with smaller bodies with both top and bottom wicks can indicate a trend change
- Much more objective and straightforward than regular candlestick graphs
Important!
The Heikin Ashi chart is a powerful tool for swing traders and investors. As long as the candles are created without a top or bottom wick, have the guts to stay with the trend and don’t close out your position to early.
The settings for the Heikin Ashi graph are:
- Green candles = Positive price movement
- Red candles = Negative price movement
- Each candle = 1 hour
| Pros | Cons |
|---|---|
| Objective graph for trend followers | Not for day traders who need a lot of details |
| Best suited for swing traders and investors | |
| Very easy to understand |
How traders and investors read bitcoin and crypto charts
There is a big difference in how to read crypto charts depending if you are a short-term trader or an investor. Day traders are focusing on smaller details and need a very detailed chart to guide them through the day while investors need an objective graph that shows the bigger picture and longer-term trends.
There are different tools to use for both traders and investors and in this section, I will show you which graphs are best suited for each time frame. The four different time frames are:
- Scalping
- Day Trading
- Swing Trading
- Long-term Investing
Below follows a description of the most effective crypto charts to use for each type of trader and investor:
Scalping
Crypto scalpers need very detailed and very fast charting programs to be able to make accurate decisions in a split second as the crypto market moves very fast. The most useful graphs for a crypto scalper are:
- Candlestick
- Bar
Why use these graphs?
When you are reading the crypto market as a scalper it’s essential that you get as many details as possible about the current market behavior to be able to make split-second decisions about whether to buy, sell, short, or close a position. Both the candlestick graph and the bar graph provide the most details in terms of price movement.
Reading crypto charts for scalping
Now I will give you some great tips on how scalpers use these charts to make accurate calls and predictions about the market. Below is a 1-minute Bitcoin candlestick graph:
- Failed test of a significant top = short-sell first confirmation bar that closes at the bottom.
- Failed test over lower range = buy green confirmation bar that closes at the top.
- Break of support line = short-sell strong confirmation bar with a close at the low.
- Test of pullback fails = short first strong confirmation bar with a close at the low.
- Continuation of downtrend = short first confirmation candle at the low of the day.
- The market is range bound after significant fall = short-sell strong confirmation candle after the failed upper test.
- Same as number 6.
- Continuation of downtrend = short sell confirmation candle at the low of the bar and low of the day.
This is how to read candlestick charts when scalping and you can do this with both candlestick and bar graphs. Practice this to perfect your cryptocurrency scalping.
Here are some recommended crypto day trading platforms with great scalping software are:
Day Trading
Day traders also rely on the same details as scalpers but they are a little bit more selective in when they enter and exit the market. The setups need to be more in favor of a price move than just a few ticks or points. The same graphs apply to day trading:
- Candlestick
- Bar
Why do day traders prefer these graphs instead of others?
They give excellent information and are very detailed in terms of the wicks of the candles or bars. As a day trader, you need to know exactly at what price the market has been and you also need to know exactly how it behaved to be able to make accurate predictions about the near future.
Let’s take look at how day traders read crypto charts.
Reading crypto charts as a day trader
To learn how to best read the market and price graphs as a cryptocurrency day trader you need to study details and be very selective with your trades and you need super-fast charting software that is completely lag-free.
Here are some tips on how day traders read cryptocurrency charts to make accurate live predictions during a trading day. Below is a 5-minute graph of Bitcoin:
- First real break of the previous support line = Short-sell confirmation bar with a strong close at the low.
- Continuation of downtrend = Add to short position when the market breaks the trading range floor with a strong bar that’s closing on its lows.
- The first capitulation of buyers and short-sellers pushing the market down = No action required, wait for further downtrend.
- The second capitulation of buyers closing their positions in a loss = Take profit on a short position, at least 50%.
- Third and the last capitulation of the downtrend at a slower rate = Take profit on the last 50% of the short position as the market is exhausted on the downside.
- The first higher low after the market capitulation in a downtrend = No action required, this information tells us that the bulls might be back and are accumulating positions.
- First higher high after the market bottomed out = No action required, prepare for possible positive break-out.
- The market is holding very steady at the top of the lower accumulation range = Initiate part of the buy position.
- The market breaks out above the accumulation range = Add to the previous buy position to get to 100% long.
- Positiv continuation range = Tighten stop loss and add to the position for a further continuation up.
This is how to read crypto charts as a day trader with a candlestick graph while analyzing the market behavior and the current setup. Practice these techniques to master the art of day trading.
Here is some recommended software with great charting for day traders:
Swing Trading
Swing traders are using a mix of detailed graphs to find entry and exit points but they also follow bigger market trends on line charts that show a more objective image of the market. The most common versions for swing traders are:
- Candlestick
- Bar
- Line
- Area
- Heikin Ashi
Why do swing traders use all different price graphs for cryptocurrencies?
The main reason is simple, they need the best of both worlds. They enter and exit with a detailed candlestick or bar graph and they follow their positions with a more objective line, area, or heikin ashi graph. It’s perfectly fine to only use one of these types but it makes it much easier to find and take setups when using several.
Let’s take a look at how swing traders read crypto charts.
Reading crypto charts as a swing trader
As mentioned before, the most optimal setup is to use both a detailed graph and a more objective one to capture the best entry points while maintaining a good distance from the market with a more objective chart.
Below is a 4-hour bar graph of Bitcoin that represents almost 3 months:
- Initial negative break of previous top = 50% short position opened.
- Confirmation of negative trend = Add to the short position.
- Complete capitulation of negative sell-off = Close 50% of the position.
- Re-test of low with a higher low = Close out the whole position.
- Re-test of previous low with less volume = No action required, wait for positive or negative signs.
- First higher high = No action required, a first positive sign, expect accumulation or fast rebound.
- A quick test of the previous capitulation = If low volume, initiate a small long position, if on high volume, wait for more information.
- Accumulation area = Add to the long position on lower prices.
- First spring after a second higher low = Add to the long position.
- A first positive break after full accumulation area = Add 50% to the long position.
- The first pullback in a strong positive breakout = Add to the long position at the bottom of the range.
- Continuation accumulation area of the previous positive break = Add to the position and tighten stop loss.
This is a standard observation of a graph for a swing trader. Apply these strategies when you are reading cryptocurrency charts to improve your outcome.
Here is some recommended software with great charting for swing traders:
Long-term Investing
When it comes to long-term investing you need a very objective graph that gives you an idea of the bigger picture. You are looking for the bigger technical trends and the best option would be:
- Line
- Area
- Heikin Ashi
So why do investors use these objective graphs?
Investors are looking for the big story when they are looking at technical charts and they don’t need a lot of details that are provided by candlesticks and bar graphs. Instead, they focus on the line, area, and heikin ashi graphs to give them information about the longer-term trends without any clutter.
Bar charts are also well adapted for longer-term investors as the body of the bar is more narrow which facilitates an easier way to predict prices on a horizon of more than 2-5 years.
It’s a great chart to use for investors who want to zoom out and see the bigger picture while being able to zoom in on necessary parts of the chart for more detailed information.
This chart is used the same way that the candlestick chart is when it comes to coloring functionality.
However, we tend to see it being used mostly by short-term traders.
Let’s take look at how to read crypto charts as an investor.
Reading crypto charts as an investor
As mentioned before, the most important aspect of charting software for investors is the focus on objectivity and the bigger picture of the market. The easier it is to follow the bigger trends, the better.
Below is a Daily graph of bitcoin covering almost 10 years:
- Capitulation of the previous downtrend = Initiate small long position.
- Positive break and accumulation with good support = Add to long position.
- Strong expansion in price driven by good news = Add to long position.
- Parabolic move driven by euphoric investors = Take some profits but keep more than 50% of the position.
- Re-accumulation period after negative break = Positive sign, add or wait for more information.
- The second parabolic move with investors in extasy = Take profits, keep less than 50% of the position.
- Distribution phase and the market is struggling = Reduce position.
- Accumulation period after major capitulation = Add to the position.
- Positive accumulation period = Add to the position.
- Strong expansion to new highs = Add to the position.
- The third major parabolic move = Take profits, and keep 50% of the position.
- Distribution period after parabola = Reduce position slightly.
- Accumulation period after major break = Add big to the position.
- Another strong expansion of the market to new highs = Add to the position.
Right now, Bitcoin might be in a positive accumulation period where it might be wise to add to current positions if you are already long. We need more confirmation to be able to safely say that the market is going to continue.
This is how many investors observe cryptocurrency charts when investing. Utilize these techniques to improve your investment results.
Here is some great software with good charting for investors:
Related: How to invest in cryptocurrency
Cryptocurrency Chart Patterns Explained
There are a ton of different patterns to keep track of as short-term traders and swing traders, however, there are some key patterns that you absolutely need to know to be able to read the market like a pro.
In this section of the article, I will list some of the most popular cryptocurrency patterns that you will discover frequently while analyzing charts. Some of them have better hit rates and these are the ones you want to focus on and leave the others.
In my opinion, these are the most reliable crypto chart patterns every trader or investor needs to know:
- Bearish Patterns
- Bullish
- Wedges and Triangles
- Flags
- Rounded Bottom
- Rounded Top
- Trading Ranges
I will describe how reliable each pattern is, what to do, and also the behavior that created the pattern. If you are familiar with some of the patterns already, feel free to skip to the ones that you lack knowledge about.
Bearish Patterns
Some patterns are bearish in nature and you need to learn how to detect if the market is creating a bearish pattern to make the best decisions.
Important!
What many guides miss to explain is that the preparation building up to a pattern is one of the most important aspects of the formation and if you miss this part of the analysis you will not be able to make an accurate prediction.
Below follows some representations of the same bearish formation on different time-frames to illustrate what I mean by this:
5-minute
| Reliability | What to do | Explanation |
|---|---|---|
| 40% | Enter upon support break with a very tight stop loss | The market leading up to this event was very negative and this pattern occurs when buyers try to buy what they think is a “dip” when in reality this is a bearish continuation pattern. |
- The preparation leading to the pattern is negative.
- This bearish pattern is usually built upon a support line that eventually breaks.
- The support line holds many short-term buy contracts which get stopped out on the break.
- As negativity breaks the pattern, buyers get stopped out and the market propels downward.
- The initial break is the most powerful and this is where you want to enter for a great scalp or day trading position.
15-minute
| Reliability | What to do | Explanation |
|---|---|---|
| 45% | Enter upon support break with a relatively tight stop loss | The market leading up to this event was very negative in the medium term and this pattern occurs when buyers try to buy the low of the month. However, this bearish pattern will not turn back up if the market rolls over at the end. |
- Same preparation as the 5-minute bearish chart pattern but this time it takes longer and the break is more significant.
- The same idea applies where the support line eventually breaks.
- There is a cluster of stop-loss orders below the line which causes the market to break very fast.
- The same entry point is just below the line break.
- Since this is a 15-minute chart this bearish chart pattern can be used as a day trade and sometimes even a swing trade for one or two days.
2-hour
| Reliability | What to do | Explanation |
|---|---|---|
| 50% | Enter upon support break with a normal stop loss | This is a larger negative continuation pattern after the market has made a significant downturn. Buyers will get punished very badly and if the market rolls over like this it signals that sellers are controlling the market. |
- The market is in a medium-term downtrend.
- The market starts a test at a previous support line.
- The market creates a fake support level that will not hold.
- The market breaks after the third attempt after rolling over.
- Same entry on the break with a tight stop loss.
- Since this is a 2-hour chart you can use this setup for a good swing trade.
As you can see with these three examples the reliability of the pattern increases slightly with each higher time frame.
Why is that really?
The answer is pretty straightforward. With each higher time frame, more money is connected to the pattern which gives it a higher success rate thanks to a bigger accumulation of buy orders that gets stopped out.
The more contracts that get stopped out at the same time, the higher the win rate of the setup.
Bullish
Now, bullish crypto chart patterns are very similar in nature to the bearish versions with the only difference being the positive build-up and positive expectation of the future continuation.
Important!
The same idea goes for the positive crypto chart formations where the build-up going in pattern is positive, meaning, the market is in a positive trend already and therefor the formation will have a higher success rate.
Now I will show some bullish formations that can be used for several different time frames:
5-minute
| Reliability | What to do | Explanation |
|---|---|---|
| 40% | Enter on resistance break after the second higher low | The market leading up to this pattern was rushing upwards in a positive trend. This pattern attracts many short-sellers who believe the market is too high. This creates a lot of buy orders above the resistance line where short-sellers get stopped out. |
- The market is in a short-term positive trend.
- Short-sellers accumulate at the resistance line.
- The second test creates a higher low that indicates the buyers are in control.
- Once the market break upward all short-sellers are stopped out and the market floods with buy orders.
- This pattern is very reliable as long as the sentiment is positive overall and the pullback is creating this rounded formation.
15-minute
| Reliability | What to do | Explanation |
|---|---|---|
| 45% | Enter upon resistance break with a standard stop loss | The market leading up to this formation is very positive and short-sellers are trying to sell the market at the tops but fail due to the positive build-up. The resistance breaks and many stop-loss orders trigger further buying. |
- This is the same representation but on a larger time frame.
- The market preparation is positive.
- Short sellers try to push the market down at the resistance line.
- This creates a cluster of stop-loss orders above the market.
- Once the positivity takes over and the formation nears the resistance line it breaks with power.
- Short-sellers are stopped out and rush the market up with new buy orders.
- This pattern is very reliable as a day trade or swing trade.
2-hour
| Reliability | What to do | Explanation |
|---|---|---|
| 50% | Enter upon resistance break with a normal stop loss | The market leading up to this pattern is in a long-term positive trend which makes it hard to stop. This is a larger formation that attracts thousands of sell orders at the resistance line. The sell orders become a flood of buy orders when stopped out which pushes that market higher. |
- This is a longer-term positive build-up that is very hard to stop.
- The market is controlled by the buyers but short-term sellers try to push the market down.
- The resistance line creates a fake safety top for sellers to lean on.
- A cluster of stop-loss orders is gathered above the market.
- On the break, all short-sellers are stopped at the same time.
- This 2-hour positive chart pattern is very reliable as long as the market is in a positive trend.
Wedges and Triangles
Wedges and triangles are chart patterns that occur very frequently in the cryptocurrency market and they appear on all time frames which makes them very important to know about. They work very much in the same way where the market is forced in the apex and will choose a direction.
When trading crypto wedges and triangles you need to take into consideration the preparation going into the formation to be able to predict the outcome with a good win ratio. The clearer the preparation the higher the reliability is.
Take a look at this 5-minute positive crypto wedge or triangle formation:
- The market is in a strong intraday trend which gives the formation a better probability of continuation.
- The line that is more horizontal will usually break, in this case, it’s the top resistance line.
- Short-sellers are trying to push the market down by adding to their positions at the top line.
- Once it breaks it’s time for you to enter the market with a tight stop loss.
- This is a very reliable formation for intraday crypto traders.
- It can be used for both day traders and swing traders.
Here is an example of a negative crypto wedge or triangle formation:
- The market is clearly negative going into the formation which gives us an idea of the continuation.
- The support line is horizontal and acts as a fake safety line for buyers to add to their positions.
- A cluster of stop-loss orders is gathered below the horizontal support line.
- Since the market is in a negative trend the buyers will have a hard time turning the market around.
- When the market breaks down, all stop-loss orders get triggered into new sell orders and push the market down further.
- Enter on the break of the support line with a standard stop loss.
Flags
Flags are usually a continuation pattern in crypto trading and they are used to either add to your current position or to initiate a position after a trend confirmation. Flag formations are highly reliable for both negative and positive trends and have a pretty high win ratio.
- The formation starts with a strong positive move.
- The top horizontal line attracts short sellers.
- The continuation of the flag comes when short-sellers are wrong and stopped out.
- A good signal to follow is the higher lows going into the break of the top resistance line.
The flag can also be used for negative trends and will also be considered as a continuation pattern.
Rounded Bottom
The rounded bottom is best used for swing traders and long-term investors. This is a true accumulation pattern where many new contracts are initiated over a longer period of time, which causes the market to completely turn the direction of a couple of weeks or months.
This is a Daily graph of Bitcoin:
- The market has done a full capitulation and started to accumulate at the bottom.
- The rounded bottom starts out very dramatically with bigger sell-offs going to the lowest levels of the formation.
- As the rounded bottom progresses it gets calmer and more structured.
- During the middle of the rounded bottom, the market tests the upper resistance line.
- At the end of the pattern, the market is clearly positive with good support.
- The pattern is usually over when the market marches up toward the support or resistance line in a thin channel.
- The break is very clear and entry comes on the first
Rounded Top
The rounded top is considered to be a full distribution cycle of contracts where buyers sell their profits to eager last-hand buyers that are late to the bull run. These buyers have become aware of the positive rise in prices too late and are picking up the profit-taking sell orders from the early bulls.
Once the majority of the bigger long investors have sold their shares the market will slowly but surely lose speed and rollover. Eventually, the buy pressure stops and the market rolls over into a new medium to long-term downtrend.
- The market preparation is the exhaust of a dragged-out bull trend.
- At the end of the positive trend, the market behaves parabolic, creating an attraction for many late traders.
- Most early investors are taking profit at the expense of eager, less experienced investors at the top.
- The market gets weaker after each investor sells for a profit.
- There are not enough day traders to sustain the profit-taking investors.
- The market rolls over at the end and the positive trend changes direction.
- All buyers at the top have clustered their stop-losses below the fake support line.
- All stop-loss orders are flushed out simultaneously when the support line is broken.
Trading Ranges
When you identify a trading range you have the option to trade the boundaries of the range or trade the coming break out, this depends on your own personality and what you feel more comfortable with.
Trading ranges are usually continuation areas where a new accumulation is taking place and the most effective way to profit from them is to analyze the market before the range.
Below is a 15-minute chart of Bitcoin representing a typical trading range with continuation.
- Before the range was created there had been a good accumulation period and a positive start to a trend.
- The range is pointed upwards which is another great sign for a positive continuation.
- The tighter the range the better it is for a positive continuation.
- There is a strong support at each higher low.
- The volume usually fades before the positive break.
- When the market continues, many early short-sellers gets stopped out and these new buy orders act as fuel for the market.
- The break is significant and your entry point should be when the market takes out the highest point of the range on high volume.
How to read cryptocurrency and bitcoin candlestick charts
We’ve all heard that it takes time to learn how to read bitcoin and crypto charts but I’m tired of that old saying and I’m going to give you some tips that I have learned throughout my own trading.
These tips will help you understand why cryptocurrencies move like they do and also help you predict the market!
Before we can go deeper into the subject and explain things with real-life examples I want to clarify a few things for all the beginners reading this guide.
First, let’s take a look at what a candlestick in crypto is and also how it works. Below is a quick description to help you understand the basic principles and also some aspects of these graphs that you previously might not have known.
What is a cryptocurrency candlestick chart?
This type of chart is based upon the Japanese charting style. The graph is plotted with bars that look much like candles and hence the name “candlesticks”.
Each candle has five components:
- Open
- Low
- High
- Close
- Shadows/wicks
The most interesting aspect of a candlestick is the time frame which can range from 1 second up to 1 year. Depending on the setting you have, one candle can indicate 1 second or 1 year which means that it took 1 second to create the candle or 1 year.
The shadows or wicks are extensions of the body of the candlestick and indicate where the price has been during the time the candle was created.
The reason we use this type is to illustrate the relationship between price movement and time. The patterns that follow is what we call candlestick chart pattern and they are visible in all cryptocurrencies that you can trade.
Understanding Crypto and Bitcoin charts
To be able to get a better understanding of how crypto and bitcoin charts work I will give you some examples and describe them in detail. I will give you some valuable tips that will help you faster understand and predict how these graphs will move in the future.
We are going to go through these topics:
- Bullish
- Bearish
- Neutral
- Suport and Resistance
- Cryptocurrency Market Cap
- Market Emotions
The most important thing to remember when you are studying price movements is to stay rational and not get married to a single idea of what the market might do. I have studied cryptocurrency charts for years and I can tell you that you are going to be wrong on several occasions when you think you are spot on.
Prepare to be wrong more than you are right and plan for it. Below follows a couple of examples of important scenarios that will play out in the market.
Bullish
What is a bullish crypto chart and how do I know that the market will stay bullish or turn around? There are a couple of things to remember when trying to read the cryptocurrency market.
First of all, the market is extremely naive and it’s prone to some irrational behaviors that repeat themselves all the time. The pump-and-dump factor has never been so true as it is in cryptocurrency trading.
Let’s take a look at a few bullish cryptocurrency charts in different time frames and try to read what’s going on.
15-minute
- Market accumulation after a period of negative movement. The bullish accumulation happens when the sellers are starting to run out of steam.
- The first mark up after accumulation with a continuation flag pattern. A very positive sign that lets you add to your position.
- Second expansion after another bullish flag formation. The market is exploding on the upside, a good sign that your position will give good profits.
- Big continuation trading range in a channel that’s tilted slightly upwards. Hold position with a possibility to add.
- Bullish spring before a third expansion. The market keeps rushing up after a positive accumulation period. Tighten your stop loss to save profits.
2-hour
- 2-hour accumulation is getting ready to move up after the market has slowed down and gotten thinner. This happens after a period of negativity and lower prices.
- Bullish spring before the breakout. The market is getting thinner on lower volume with almost no sellers. Get ready for a strong breakout since the 2-hour chart is loaded with more contracts.
- First expansion after a period of a few days accumulation. Mostly green candles which is a good sign for the coming days.
- Bitcoin keeps grinding higher with not much interruption. Sell-offs are bought quickly and the trading range seems very positive.
- Second expansion after a positive second accumulation. The chart usually gets very thing before moving to the next level. Get ready when things start to slow down as this is usually the time for another leg up.
Daily
- Very big accumulation period after a very irrational sell-off and capitulation through the whole cryptocurrency market. As time passes, the graph is getting thinner and thinner. Prices are also moving toward the top of the accumulation range, a sign that most sellers have sold and the buyers are gaining control.
- Big markup in price followed by increased volume. A very positive sign for the coming days and possibly weeks. Buy or add to your current position.
- Continuation period with another accumulation range. Add to your position as the market looks continuously positive.
- Second expansion with a lot of buyers piling ontop of each other. The chart is going parabolic which is good for the short term but not the long term. Tighten your stop loss.
- The market seems to continue although irrational. Do not buy or add to your position. Tighten your stop-loss and wait for more information.
- The third expansion comes with very irrational behavior. Get ready for large profit-taking. This positive trend is about to turn around or get stuck in a larger trading range.
Bearish
The same goes for a bearish crypto chart, it’s all about the behavior behind the traders who are controlling the market. If you can read how they will act then you will be able to read the graph as well.
Below follows some bearish chart formations on different time frames. Read the explanation to get a better idea of how to read bearish cryptocurrency charts.
15-minute
- The last part of a top distribution is where buyers have lost the steam and sellers are piling up.
- Last try from the bulls to make a move. These final pushes in top distributions usually happen when the market is trading on low volume. Many charts can fool you here if you are not observant. Positive moves should always be accompanied by higher volume.
- The first real break through the positive support line. The breakout happens on higher volume as most of the late bulls get stopped out and all buy orders are turned to sell orders. This is a great time to enter the market short when the chart is in free fall.
- First try to regain control by the bulls fails pretty fast. Don’t get fooled by quick pushes that come without any accumulation.
- Second break to lower levels that stop out early bulls. Another sign is that the crypto chart is controlled by bears.
- After a choppy bearish channel, the bulls make a desperate move on lower volume to gain some ground without succeeding. When you see this you need to realize that the bears are in control. Push your short position.
- The total capitulation of the bulls and the final late bears are selling everything they have. When this happens the chart is starting to reach the end of the down move.
2-hour
- 2-hour chart with a distribution pattern at the top. The market has been selling with larger sell blocks before this formation. Now the graph is rolling over.
- When the market is unable to pass previous highs and seems to be rolling over it’s time to start looking for the sell button, or at least for negative signs.
- First major break of a positive support line. Many long positions are stopped out and early sellers push the chart lower.
- First negative accumulation after a very negative break. The bears are in full control and the bulls are terrified of the next move. However, there are still bullish short-term traders trying their luck for a pullback.
- The second break and the negative trend are confirmed. The rest of the bulls are stopped out and forced to liquidate their positions. At this time you should push your short positions as much as you can.
- The second accumulation range doesn’t last long since there are not many brave bulls left. The market falls down on lower volume as the chart is getting very thin due to being very one-sided.
- Complete capitulation is where some long-term bulls get scared and close their positions. This is a perfect opportunity to take profit on your early short positions. From here, this cryptocurrency chart will most likely trade sideways in a bigger pattern while trying to figure out the direction.
Daily
- Parabolic move at the end of a positive trend. This crypto chart is only attracting the most irrational bulls that trade without proper planning.
- A second parabolic top after a huge sell-off on very high volume. At this point, you should be on your guard since these sell-offs on high volume usually means that many larger traders are taking profits and the market will lose a lot of steam.
- Lower high on lower volume after two larger sell-offs. Now the graph is starting to look like a larger distribution formation on the Daily time frame. This is usually a sign of a longer-term downtrend in the cryptocurrency world.
- A floor has been created and many cryptocurrencies seem to be rolling over. The chart is getting thinner and thinner which is a sign of weakness and a lack of bulls. Get prepared to enter short positions.
- Massive break that cracks most cryptos. When this happens you want to push your short positions as much as you can and observe the coming trading range.
- First accumulation range for bears. There are still bulls looking to buy at cheaper prices. This is evident thanks to the time of this range that lasted for several weeks.
- Larger investors buy the dip which created a huge jump in prices as the coins are trading on very thin volumes. These jumps never hold and a rollover is coming. You will for sure be stopped out by this unforeseen event which is almost like a black swan event.
- The short-term positive reaction is rolling over and when you see this you can initiate new short positions.
- The capitulation of the bulls that got attracted by the jump. Tighten your stop loss and wait for more information. The coin is still at high prices and the negativity is not turned around yet.
Support and Resistance
Support and resistance in cryptocurrency charts are something that many traders study hard to perfect. The fact about these events is that they are mostly used as an attraction of contracts among traders and I will explain how this works.
Whenever you see a support line or a resistance line in a graph of a coin you will feel some sense of security to trader around it.
This is a feeling that many traders and investors feel and it causes a problem for everyone that is involved.
How many times have you traded around a major support or resistance level only to get surprised by a move that stopps you out?
I will explain why this happens, how you can prevent it, and also how you can use it to your advantage.
How to use support and resistance in cryptocurrency charts
As long as I’ve been trading cryptos there have been clear levels of support and resistance. In my early days, I always used them as a security level to either open a position or as a level to put my stop loss.
The problem with these levels is that everyone thinks the same and this is bad news for everyone. Big traders and larger market movers know this and they use it to their advantage.
But how?
When truly big whales want to stock up on some fresh bitcoin or any other altcoin they are in the need of liquidity or contracts in other words. Without this liquidity, they will not be able to open as large positions as they want.
How do crypto whales find liquidity in charts? They find support and resistance levels, but why?
Do you remember all the stop losses and positions you opened near a support or resistance line, yes that’s where the liquidity is?
They use very complex strategies to break these levels and stop you out and use your stop-loss orders as liquidity, and it’s very effective.
With one single move, they push through thousands of stop losses and buy all the contracts that are automatically sold.
So, the next time you are using a support or resistance level, keep this in mind.
Cryptocurrency Market Cap
Let’s go over how the cryptocurrency market cap chart works and how to read it. Here are some points to take notice of:
- It is a representation of the value of all coins together in one single chart.
- It swings up and down depending on the current trend.
- Long-term investors use it as a gauge to see the bigger picture of all coins.
- It is a great tool to see when prices are low and when prices are high.
As you can see in the chart below, we are currently at very high prices, almost at all-time highs. This might be a good time to take profits on your crypto if you are a swing trader.
However, if you are a long-term investor you might want to use this time to make research and re-allocate some of your profits for new cheaper coins.
An effective way to use this graph is to see if cryptocurrencies are currently in a downtrend, uptrend, neutral stage, low-priced, or highly-priced. Make your own judgment and then make a decision either to invest or wait for more information.
A lot of market emotions are visible in this chart and when you become good at reading graphs you will be able to find great entry points while analyzing this chart.
How to read different time frames of cryptocurrency charts
There are several different aspects of reading a cryptocurrency chart depending on what time frame you use. For example, a scalper or a day trader read charts differently than long-term investors. But why is this and how is it any different?
The simple answer to that is that the goal is different for different investors and traders. Short-term traders only plan to trade for a couple of minutes or hours, therefore, the timing of the price is of the most importance.
Long-term investors only care about the longer-term prediction and they want to see a healthy graph that is in a positive trend. They could not care less about the daily timing when investing.
Let’s go through how different time frames are analyzed and how to read crypto charts for each time frame.
Minute
When cryptocurrency day traders read charts on a minute-based time frame they are only looking to time the market correctly and they do this by analyzing patterns that they have structured beforehand.
The most important aspect here is the details of the graph. The smaller the time frame the more details can perceive of the price and this will, in turn, help you enter and exit with profits.
Below is a 3-minute representation of Bitcoin to illustrate what I mean by this.
- First break of a short-term top with higher volume below the support line.
- Negative continuation channel with short-sellers pushing bitcoin lower while bulls are slowly getting squeezed.
- The rest of the bulls are capitulating and getting stopped out while short-sellers push aggressively. The fuel comes from both sides with high volume which makes it a great opportunity for a day trade.
- First profit taking from shorts, no action at all from buyers due to the extreme negativity.
- Uncertainty in what way the market is going, mostly sellers in control, expect sideways to lower movements.
- The final push from sellers on lower volume lets you know that this negativity might be over soon.
- First big buyer coming into the market to show some positivity, a great sign that buyers are starting to fight.
- First higher high after good buy volume. Short sellers keep pushing down bitcoin. Start to look for lower highs and positive channels.
- The first positive channel is caused by real buying.
- Another attempt to break the tops but sellers keep initiating short positions. Keep in mind that the sellers have stop losses directly above this level.
- Higher low with lack of selling pressure.
- Test of the low that fails followed by a positive channel caused by fresh buying.
- Spring before the positive break. Time to open long positions with stop loss below the previous low.
- Massive positive expansion. Short sellers are stopped out and the trading is now one-sided. Push your longs and tighten your stop loss.
- Positive channel after a positive break. Add to your longs or wait for more information.
This is how day traders use the 3-minute chart to read cryptocurrencies. Take notice of how they use all the small details to gain an edge and predict the future.
Hourly
The hourly chart is dominated by mostly swing traders and some day traders who like to keep an eye on the bigger picture. If you are aiming to trade a coin for a couple of days or even weeks, the hourly graphs make for great entries and exits.
We are still focused on details but now with more attention on larger money that might cause a move in either direction.
Below is a representation of how to read the 2-hour bitcoin chart. (this is the current price for bitcoin)
- Strong initiation of sellers at top levels with a break below the positive trend line. Top buyers getting stopped out immediately.
- Second push down after a tight negative range. Buyers are still getting stopped out. If the price gets stuck like this on lower levels, it means that there is none to pick up these lower prices, for now. Push short positions.
- Complete capitulation by buyers that get stopped out. Remember that Bitcoin is close to all-time highs and has a lot of attention. There is a lot of buying at these levels and it makes for wild swings on these longer-term pullbacks. At this time, most of the buyers should have sold due to the panic selling. Feel free to take profits on short positions.
- A slow second test of the low on much lower volume. This is normal after a large sell-off. At this time many smart buyers initiate their first long positions since most of the negativity has been flushed out.
- Another test of the lows that quickly gets bought up. This is a sign that long traders have started to pick up contracts at the bottom levels.
- First higher high signals a comeback of the bulls. When this happens, stay alert for low prices on low volatility.
- The market rolls over again since there is no real confidence from the majority of the investors and traders. We need more time to develop positivity.
- Now the volatility has decreased significantly and the price is trading mostly sideways. This is not a positive sign but it’s a sign that the negativity is gone and you can start to initiate a swing trade long position.
- The volatility is extremely low at this point and the price is trading at the lowest point. Now is a great opportunity to open long positions with a stop loss below these levels. We have seen most of the selling and these positions should be protected.
- This channel is the most positive so far on this bitcoin chart. Hardly any pullbacks and the channels are going straight up. The last channel acts as a spring which lets you open bigger long positions with a tight SL.
- Expansion on higher volume, add to your longs or initiate your first position.
- Positive first accumulation range with a clear buying opportunity.
- Prices continue higher with a positive channel. This is only positive and you should tighten your SL.
- Second pullback with another opportunity to buy. Keep your SL below these levels in case the market surprises.
- Still, no negativity in the market but prices seem to become smaller. There is a risk for bitcoin to roll over so keep your stop loss close. So far it looks positive but we have reached a slower point of this uptrend and traders might be looking to take profits if higher prices are not reached.
As this is a bigger time frame it requires more attention and a little less focus on detail. This is one way to read an hourly cryptocurrency chart.
Daily
Investors are masters of reading the daily crypto charts and all they care about is the market sentiment and longer-term trends. This is where you find the bigger picture and the story behind the larger moves.
Below is a representation of how to read the daily cryptocurrency charts for investors.
- A larger support level has been created with a cluster of stop loss orders below. This is a very dangerous level to trust when the price looks like this. Sideway action on low volatility is a sign of weakness.
- Huge markdown were a lot of buyers have to sell in panic. This selling causes even more negativity and the chart is very one-sided. Usually when cryptocurrency prices drop this fast and violently, the selling stops after a few panic sell-offs.
- This range is an accumulation area after the majority of the short-sellers have pushed their contracts. Whenever you realize that the market has nothing more to sell you should always be starting to look for the upside. If there are no more sellers there is only one thing that can happen, sideways or up which is a very low-risk trade.
- First expansion phase after the several month-long accumulation periods. The market is going straight up which is a combination of new positivity and shorts getting stopped out. Anyway, this looks good for the upside.
- New investors and larger traders jump on the positive trend to push prices higher. This is a very one-sided market and you should not be worried about minor pullbacks.
- Distribution phase with profit taking from many swing traders. A floor has been created which causes a fake safety zone. Many buyers have gathered stops below.
- The trend has turned around and many later buyers are stopped out which causes more negativity. As a long-term investor, you should not worry about this since you are in it for the long run. Make sure to analyze how price behaves at lower levels. So far Bitcoin is trading at higher prices and there is not much to worry about.
- Swing trade accumulation period which is a good sign for the long term since the selling will be paused for a while.
- Short-term distribution phase that will attract new investors due to high prices.
- Coronavirus panic selling. Nothing has changed with the fundamentals of Bitcoin. This is a black swan event that should be used as a buying opportunity.
- Bitcoin trades higher in a very positive channel immediately after the panic selling stops. This is a sign that there is a lot of underlying positivity to push prices higher.
- Sideways action on higher prices is a sign that there are not many short-term or long-term sellers. Very good for all investors looking to stay long.
- Very short pullback after a new top test. The market seems very positive and it looks like it’s becoming one-sided with the buyers in control.
- Huge markup with the new ATH. Push your long positions and enjoy all profits. Remember that this kind of buying usually is followed by more irrational buying. Get ready to take profits soon.
- When the market hits these levels it is okay to take profits on 50% of your position and wait for more information. If you bought earlier around $4000-$8000 you have made roughly 10x. This is more than enough to close out some profits.
- The first larger pullback in this massive uptrend. It comes on higher volume and for me, this is a sign of profit taking by very early buyers. Only large investors can cause this amount of volume. Now is not the time to start any new positions. Be to sell out more if higher prices are reached.
This is how investors read the daily crypto charts and it should be your only focus to try to analyze the bigger picture.
How to read crypto charts with technical indicators
This section of our cryptocurrency chart reading guide will focus on how to use technical indicators together with your favorite altcoin.
Let’s get down to the meat straight away.
Depending on what kind of trader you are you will need a special indicator to match your time frame and style.
Below is a comparison table of some of my favorite technical indicators. This is what you need to know about technical indicators and cryptocurrency charts before you start.
| Indicator | Type | Best for | Software |
|---|---|---|---|
| RSI | Momentum | Day Traders | PrimeXBT Binance Bitfinex |
| Volume | Strength/Weakness | All Traders Investors | BitMart StormGain |
| Moving Averages | Trend | Swing Traders Investors | Beaxy Bitpanda |
| Bollinger Bands | Volatility | Day Traders Swing Traders | NDAX.IO CoinField |
| MACD | Trend | All Traders | EXMO |
RSI
The Relative Strength Index will indicate oversold and overbought areas in the price and is a great tool to use when a coin is stuck in a trading range. It does a great job of identifying high and low levels of the coin.
This is the 3-minute chart of bitcoin with an RSI indicator applied:
- Overbought area = Short-sell
- Oversold area = Buy
- Overbought area = Short-sell
- Oversold area = Buy
- Overbought area = Short-sell
During this trading day, there were at least 5 good setups generated by the RSI indicator. There was one overbought area at the end of the day that failed but this is where your stop loss comes in to protect you. Nevertheless, 5/6 setups were profitable.
Volume
What makes the volume indicator special is the fact that you can read strengths and weaknesses on any cryptocurrency chart.
If a positive move is followed by increased volume it is more likely to continue than if the volume stayed low. Below is the daily chart of bitcoin with some highlights on the volume indicator.
- Complete capitulation on increased volume where all short-term traders and scared investors sell in panic.
- Low volume area at the top of a range indicates that negativity is gone.
- Price expansion followed by volume expansion indicates great follow-through and continuation.
- Massive selling at parabolic move indicates a halt of the trend.
- Large buy order indicates the interest buy long-term investors.
- Price increase with lower volume indicates a lack of commitment from investors and short-term traders.
- Corona panic sell-off that cleans out most scared hands. High volume tells that most traders reacted to this.
- Low volume area at top levels without negative price movement. Indicates that negativity is gone.
- A small sell-off on lower volume tells that most traders are positive at this moment.
- Large sell-off at parabolic all-time highs.
- Increased volume on sell-off tells that investors are getting nervous about downturns.
During these three years of price movement, the volume indicator will give you plenty of clues when reading cryptocurrency charts.
Moving Averages (MA)
Moving averages are true trend-based indicators that help you spot medium to long-term trends. Best used for swing traders and investors that want a very objective cryptocurrency chart.
Take a look at this 4-hour bitcoin chart to see how to use moving averages when reading crypto charts. The moving average settings are 50 and 200.
- First break of both 50 and 200 MA into a positive trend.
- Bitcoin respects 50 MA and gets support.
- First touch of 200 MA with full support of uptrend.
- Trend accelerates and support is help at 50 MA.
- First sell off with a slight break of both MA.
- Positive trend intact with 200 MA support.
- Complete break of both MA after a period of sideways trading.
- Upper test where both MA acts as a resistance. Trend might be turning down.
- 50 MA acts as resistance while the price tries to recover.
- Push above 50 MA but 200 MA is respected as resistance.
- Both 50 and 200 MA acts as resistance.
- First push above both MA’s and 50 MA acts as short-term support.
This is one way how to use moving averages on crypto charts to improve your probabilities of timing your investments and making good swing trading calls.
Bollinger Bands
The Bollinger bands are mostly used by cryptocurrency day traders and it’s a tool to help you identify volatility and deviations from the current range.
Take a look at this 5-minute chart of bitcoin with the Bollinger Bands indicator applied.
- Clear deviation and increased volatility through the lower range.
- Spike of volatility to the top of the range that falls back into the range.
- Strong deviation on high volatility that instantly gets bought up back into the range.
- Huge spike of volatility that triggers instant selling.
- Volatility increases as the market drops trhough the range and buyers pick the price upp immediately.
- Test of the upper range with increased volatility that fails and gets pulled back.
It is a fantastic indicator that can be used with most intra-day time frames to find good day trading opportunities.
MACD – Moving Average Convergence Divergence
The MACD indicator helps you read charts when it comes to momentum-based setups. If you are looking to sell or buy as a day trader you might need something to back up the momentum behind the move. Then the MACD indicator is great for crypto charts.
Here is a 5-minute bitcoin chart with the MACD indicator applied, lets take a look at how to read it.
- Bitcoin drops and MACD indicates a rising momentum to the positive side. Buy signal when histogram turns up.
- Quick spike up that results in a pullback. MACD shows that buyers are losing momentum and sellers come in. Sell signal when MACD histogram turns down.
- Short pullback and the buyers are back in control, this time with a weaker signal from MACD. The buy signal comes when the histogram turns up.
- After a fast drop MACD shows that the momentum is going in the positive direction and gives a good buy signal that results in a decent day trade.
- The price slows down and MACD shows that the momentum turns down. The sell signal comes when MACD turns down.
- After a fast drop, the price momentum turns up again for a quick day trade. MACD gives a buy signal when both lines cross.
- Quick sell signal when MACD shows lost positive buying pressure and momentum turns down.
Use the MACD indicator with crypto charts when you need help to identify which way the underlying momentum is going. Sometimes the market might go up but there is an underlying force that pulls it back down again.
This is where the MACD indicator is really helpful when you are reading cryptocurrencies.
Related: Best cryptocurrency technical indicators
Conclusion
This is a helpful guide that covers everything you need to know about cryptocurrency charts and how to use them in the best way possible to be able to trade profitably. We have laid out the guide to suit both day traders, swing traders, and crypto investors. In this article, we focus on:
- The basics of how to read crypto charts
- All the different kinds of cryptocurrency price charts that you need to know
- Well-known patterns that can help you predict future price movement.
- How to read cryptocurrency candlestick charts.
- How to read different time frames
- How to read technical indicators with crypto charts.
Throughout this guide, I give you detailed explanations of each chart that is presented. This will give you in-depth information on subjects that you didn’t know before and I’m sure that you will find it really helpful to see how day traders, swing traders, and investors use cryptocurrency charts to make accurate decisions.
After you have mastered the graphs we suggest that you continue to our latest guide on how to analyze cryptocurrency to learn more. We also recommend that you read our guide on crypto exchanges that offer stop loss before you choose a platform to trade on.
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FAQ
It might seem that all of them are just the same but the more you study them the more they get separated and you will find that they all behave differently.
Beginner traders will need a basic understanding of how graphs work to be able to use them in the first place. Start by showing this guide and from there on you can build on the knowledge.
This guide covers everything you need to when learning how to read charts in cryptocurrencies.
The logarithmic graph responds to skewness much better and large values get smoothed out. Another great factor with the logarithmic graph is that it shows changes in percent instead of actual numbers.