Sorted, I understand the indicators. Show me the next lot of fancy stuff! – TA, Trading Analysis.

Now that we have established a price direction using cryptocurrency indicators, we’re going to have to see if this direction is following any trading trends.

Bitcoin, similar to the stock market, has certain ways in which the value is traded. Imagine there is a big chart and everyone has seen a trend together and are following the same lines and levels. It is this that we need to identify as well.

If we’re all looking at the same thing and deciding when to buy and sell, alongside other traders, we can then hopefully catch each buy wave and ride them up as well.

So, is this possible? Yes, but it isn’t an exact science. You will not be right all the time and the market can shift, without warning. However, get it right and then there are profits to be made. Again though, it’s about managing risk.

The art of making money (money making isn’t really a thing, per se. It’s just a transfer of wealth) with cryptocurrency is getting into a trade just after a move up confirms.

Usually once a rocket has taken off it is too late to jump on board.

I never now, after getting caught out too many times, chase a trade. When it starts a big move up it’s not worth chasing and trying to enter when it’s too late – FOMO.

Okay, back to trading tools.

The first thing I like to do is identify support and resistance. All cryptocurrency, when trading normally, moves from a support level.

When the value is increasing it tests a higher resistance level, and if there is enough buying pressure, it will move above the resistance level. This old resistance level then becomes the support for the next move up.

Resistance = When the price has reached the higher level and isn’t expected to move up much higher in the short-term. This is also an area where most people will execute a ‘take profit’ command or close their positions.

Support = When the price has reached its lower level and isn’t expected to move much lower in the short-term. This is where most people will set their buy commands.

Bitcoin has recently failed to break through $10,493.71 after a climb up and is descending back down. This higher level is now classed as a ‘resistance’ zone. This can be confirmed by checking earlier dates to see if this has actually happened before, if so then this will confirm the resistance area.

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For example:

As you can see from the above image it has been very difficult for Bitcoin to pass $10,400.

Previous to September 2019 it had been passed a couple of times but quickly returned back under.

There has been a couple of smaller breaches since but nothing that lasted and it seems to be getting harder to sustain.

At the end of September Bitcoin was unable to get past this point. Since then it has been rejected 3 more times.

It is highly likely that $10,400 will be tested again once Bitcoin has done a retrace to the lower support area. This is known as in a ‘channel’, which I will explain in a while.

Bitcoin has today bounced of a support area at $9,096.32. If the price passes this point it is highly likely that it will move much lower. The support for this current area can be confirmed again by looking at past movements.

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For example:

This area of ‘support’ has been tested a few times and appears to be getting weaker.

We can locate other areas of support lower down, which Bitcoin is likely to bounce off.

If by using our indicators we think that Bitcoin is about to change direction we could then consider buying at these levels.

I normally wait for confirmation and let Bitcoin fully change direction before entering a trade. Just in case it continues to fall.

The mission, now that Bitcoin appears to be descending, is trying to work out where it might bounce. There are 2 likely areas, which are: $7,801 and $6,840.

** Click on image to expand **

There is every possibility that Bitcoin may hold at this price and bounce back up. I don’t think that is likely, I can work this out by using a few more trading tools.

To explain how to use them I will break these next tools down into sections to prevent this post becoming too long.

Please remember; I am not and expert at this at all. I am only showing you what I have used and learned over 2 years of trading.

There are far more, in depth, and more knowledgeable websites to be found using Google.

I am only showing the very basics in the hope that this helps to get some people started on their own crypto journey.

The tools I will cover how to use are:

How to use ‘Channels’

How to use ‘Waves’

How to use ‘FIBS’ – Fibonacci Retracements

How I use ‘FIB Extension’ – Fibonacci Extension

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