Would you like to learn the basis of technical analysis for cryptocurrency trading with support & resistance and trend lines, because if you are a beginner in crypto trading, it's where you start?
Cryptocurrency trading has exploded in recent years, everybody is involved selling and buying crypto coins and exchanging one cryptocurrency to another. New investors entering the market may think it’s easy to take part in this digital trading, but it’s not as easy as it seems.
Support & Resistance, and Trend Lines for Crypto Trading!
There are so many things that players in this kind of trading need to understand before venturing into it. Most new traders think that crypto trading is all about blindly buying coins and keeping them until prices go up before selling them, but it’s not how it should be.
There are trend lines that one should look for before making any decision in cryptocurrency trading. You need to understand trend lines, but also support and resistance, before making any decision. This will show you what are the worst and the best times to invest in cryptocurrency.
Trend lines
Trend lines are important indicators used to determine the direction that a coin is moving towards. Price movements tend to follow a specific trend and can either be long or short term.
The trend lines are usually determined by supply and demand of a coin. One needs to understand the psychology of the market in terms of supply and demand of the market. The direction of a coin is important for crypto traders as they use this to make a decision of whether to buy or sell a coin.
Trend lines take three patterns namely the up trend where the market goes up, the down trend where the market goes down and the sideways trend where the market goes sideways. This is determined by drawing lines in your chart and is an important tool for identifying support and resistance.
Support and resistance
Cryptocurrency trading involves so many risks that may involve running too many losses. Managing these risks involves finding support and resistance zones.
The difference between support and resistance is known as the range. When a coin falls at the support level, the demand becomes higher as many buyers are willing to buy since they believe the currency price is low and everybody wants to buy at that low price.
If this happens, the demand will go up while supply goes down causing the prices to go higher causing an upward trend.
Resistance, on the other hand, takes the opposite direction.
At this level, many sellers are willing to sell since they believe that the price is too high and they are likely to make huge profits. Everybody is willing to sell at this zone whereas very few are buying, hence higher supply against low demand. The prices are rejected at that point causing in rapid price decreasing, hence resulting to a downward trend.
The important factor to note about the support and resistance level is that one results to another. When a support is breached, it moves into resistance and vice versa.
For instance, when many people are investing at the support zone, they believe they are getting a better bargain by buying at very low prices, and then the price goes up and they start selling again to gain huge profits.
Without knowing it, people start rejecting the low prices and the price drops all of a sudden to enter the resistance zone.
This trend goes round and round as one results to another.
Trend lines are important indicators to price direction and traders should use this to determine better times to enter or exit the market. Support and resistance points give a trader some valuable information they can use of market entry or exit points. This is because a trader can predict a price action when it reaches the support exit points.
It can either bounce back or continue in the same direction until it hits the next support or resistance level. Price charts are very important to traders and investors as they are used to determine the support and resistance. They are the best clues that one can use to make significant decisions regarding price levels by looking at either the number of touches in the lines, price moves, time and volume at a given price levels.
Conclusion
Although there are many other technical analysis indicators used to determine price movements, support and resistance are the most common and key concepts used by analysts.
When traders take a keen interest in determining the support and resistance levels, they can get clues to the future price movements which can help them make informed decisions regarding their investments.
This will help them manage risks and thrive in cryptocurrency trading.
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