All you need to know to start doing technical analysis.

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Bitcoin and Crypto Technical analysis Wednesday, June 01, 2022 - 19:20

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The crypto market is an exciting place, bursting with traders applying a variety of techniques to make gains. The concept isn’t difficult to grasp though, and you can trade it too. In today’s article, we explore some of the basic terms related to technical analysis in crypto. Readers are advised to read the previous edition here for a more in-depth understanding of what technical analysis is all about.

Source: Tradingview, Binance

Support

Support and resistance are two fundamental technical analysis concepts in crypto trading. At their core, these are the price levels that act as price barriers. They serve as indicators of the beginning of reversal trends.

Support indicates a price level at which a downtrend is expected to pause due to a concentration of demand or buying interest. As the price of a crypto asset falls, so does the demand for the asset, forming the support zone. The influx of buyers looking to buy the cryptocurrency at a lower price creates this support.

Resistance

The level of resistance is where the supply of a crypto asset is strong enough to prevent the traders from pushing its price in a certain direction. As the price rises and approaches resistance, sellers (supply) become more eager to sell, and buyers (demand) become less eager to buy.

When the price falls below a support level, it becomes resistance. When a price rises above a resistance level, it frequently becomes support. When a price passes through a level of support or resistance, it is assumed that supply and demand have shifted, causing the breached level to reverse its role.

Trendlines

Trendlines are lines that traders draw on charts to connect a series of prices or to show the best fit for some data. The resulting line is then used to provide the trader with a good idea of the direction in which the value of an investment may move. They can also be used as support and resistance, as well as to open and close positions.

To indicate the current price direction, a trendline is drawn over pivot highs or under pivot lows. Trendlines are a visual representation of support and resistance in any time frame. They depict price direction and speed, as well as price contraction patterns.

If company A is trading crypto at $40 and moves to $50 in two days, the analyst has two points to plot on a chart, starting at $40, then moving to $50. The trendline drawn here has a positive slope and indicates the traders should buy in the direction of the trend.

Moving Averages

A moving average is a technical indicator that market analysts and investors can use to predict the direction of a trend in the crypto market. It averages the price data points over a specific time period to arrive at a smooth value over time. It is referred to as a 'moving average' because it is constantly recalculated using the most recent price data of crypto.

Fibonacci Retracement

Fibonacci retracements are horizontal lines that indicate areas of support and resistance. Each level is assigned a percentage. The percentage denotes how much of a previous move the price has retraced. The Fibonacci retracement levels are 23.6 percent, 38.2 percent, 61.8 percent, and 78.6 percent. The trader can identify these retracement levels by plotting the Fibonacci retracement levels and thus position himself for an opportunity to enter the trade.

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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

 
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