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To the layperson, “the market” may seem like some complex system that only a specialist could ever hope to understand, but the truth is, it all comes down to people buying and selling.
How to trade crypto might seem like an esoteric concept at first. Once you begin to understand it, however, the idea becomes a lot simpler.
The totality of active buy and sell orders is a snapshot of a market at any given moment. Reading the market is the ongoing process of spotting patterns, or trends, over time, which the trader can choose to act upon.
Overall, there are two market trends: bullish and bearish.
A “bullish” market, or bull market, occurs when the price action appears to steadily increase. These upward price movements are also known as “pumps,” as the influx of buyers increases the prices.
A “bearish” market, or bear market, occurs when the price action appears to steadily decrease. These downward price movements are also known as “dumps,” as the mass sell-offs result in the price going lower.
Bullish and bearish trends can also exist within other larger opposing trends, depending on the time horizon at which you look.
For example, a small bearish trend may occur within a broader long-term bullish trend. In general, an uptrend results in price action making higher highs and higher lows. A downtrend makes lower highs and lower lows.
Another market state called “consolidation” occurs when the price trades sideways or within a range. Typically, consolidation phases are easier to spot on higher time frames (daily charts or weekly charts) and they occur when an asset is cooling off after a sharp upward or downward trend.
Consolidation also takes place ahead of trend reversals, or in times when demand is muted and trading volumes are low. Prices essentially trade within a range during this market state.