U.S. Congress Struck a Positive Tone on Cryptocurrency in Latest Hearing A congressional hearing before the U.S. House Committee on Agriculture today struck a positive tone towards the impact that cryptocurrency and digital assets can have for
On the most fundamental level, traders use visualization as a crucial element to technical analysis. Patterns showcase the unique ability of our brains to locate patterns and build models by comparing price charts to separate historical price movements.
These price formations tend to correspond to similar historical price movements, due to the fact that crowds tend to react to similar situations in similar ways.
View a chart as a “log” of crowd behavior, in order to better understand why price history can help us gauge the current state of the market. Price history not only allows us to spot the current mood of participants, but most importantly, the balance between buyers and sellers.
On the other hand, your mind can play tricks on you as well. Traders tend to see patterns that aren’t necessarily there and confirm these subconsciously. Psychologists call this “confirmation bias”. It is the most notorious enemy of traders and investors alike.
While visualization is an important and necessary tool for traders, especially experienced ones, never treat a chart or pattern as the end-all be-all. They aren’t magical tools, however in experienced hands, they can boost your returns and help you find great trading opportunities, while protecting your investment.
Support and resistance levels can be seen as the most basic (sometimes most reliable) chart patterns. As a general rule, simplicity is extremely helpful when formulating your trading strategy. Over complicating your charts with a plethora of charting tools and indicators will only lead to confusion. You can certainly find some confirmation on complicated charts; however it typically won’t give you any more direction than simple ones.
The patterns we’ll discuss below aren’t necessarily the Holy Grail of chart patterns. They are simply the best tools we can use to trade the cryptocurrency markets with at a surprising degree of accuracy.
For example, many traders like the head and shoulders pattern as it has an accuracy of over 80% when it’s fully complete. Not too many other patterns can match that.
Within this guide, I’ll go over 4 of the best and most widely used chart patterns in cryptocurrency trading. Follow the instructions and practice on a live chart. Teach yourself how to spot these patterns and trade them appropriately.
Let’s start off with the classic head and shoulders chart pattern which most people have heard of and know what it resembles.
This pattern generally signals a reversal in the market and means that there is a failed attempt of the trend to move any higher. An uptrend can be easily defined as a series of higher highs and higher lows. In the case of the head and shoulders pattern, the last trend (right shoulder) fails to make a higher high and higher low. Soon thereafter, a new downtrend is initiated.
Turn the pattern upside down, and we have an inverse head and shoulders pattern. This signals a shift from a downtrend to an uptrend.
The head and shoulders pattern is considered to be the most reliable patterning trade. It can often be easier to spot on a chart and can help you filter through all the clutter.
This is what is known as a continuation pattern. It’s considered one of the most reliable bullish patterns in trading. Also referred to as a pennant or wedge, the bull flag is often formed when the price enters a consolidation phase following a strong uptrend.
The consolidation phase shows that the market is gathering momentum for the next rally up. It’s a very natural part of a trend where those who were at the beginning of the trend are starting to take some of their profits. On the other hand, new traders are entering the market and taking positions for the next run-up in price.
This pattern is a bullish one that’s very well known in the stock market and also appears in in the crypto market just as often.
As you can see from the image below, the pattern forms a cup like shape before a dip on the right corner of the cup, leading to another significant rise in price. In order to confirm the pattern, you would want to look out for a significant increase in trading volume near the end of the handle. A buy order should be entered when the price breaks above the right corner of the cup.
The logic behind this trading pattern is that the cup represents the bottom of the market and the handle creates a higher low which by definition means that an uptrend will begin.
This pattern is very similar to the bull flag, where price appears to be stuck between a support and resistance. The more touches there are between the support and resistance the more reliable the pattern is considered to be.
The rectangle pattern is a trend continuation pattern and is often a waiting game for traders as it’s difficult to tell exactly when the price is going to break out. Depending on the direction of the preceding trend, the rectangle can be either bullish or bearish.
This pattern can be traded into ways. One method would be by placing an order at the lower end of the rectangle and placing a stop loss right under. The second method would be placing a buy order just above the upper end of the rectangle in hopes of catching the breakout.
The problem with this last option is that a price spike can happen quickly and then subsequently dip back down through the rectangle pattern. This is called a “fake out” and occurs quite frequently. As with anything you do in trading, taking the slightly more conservative approach should serve you better in the long run.
Now head on over to TradingView, and practice spotting all four of these popular trading patterns. Once you think you’ve got a handle on things, open a demo account or paper trade (fake money) on TradingView.
The last step will be to start trading with a very small amount of cryptocurrency within an exchange. See how well you can stick to these charting patterns, with money on the line. That’s a whole lesson in itself, that no trading guide will ever be able to teach you.
When you think of popular cryptocurrency trading tools, the Fibonacci retracement level tool is right there at the top of the list. Helping traders reveal key levels to place buy and sell orders is a very simple way to explain the purpose of this highly effective tool and doesn’t entirely do it justice.
For those traders who properly know how to utilize its formidable ability to spot these crucial levels of support and resistance, it can and will make you into another trading success story.
For now, let’s give you a little back story as to why institutional traders have been using this tool for decades…
Through his travels he discovered a Hindu-Arabic numerical system and quickly figured out its advantages over the current European system at that time. This led him to become one of the most influential people to lead the adoption of the Hindu Arabic numerical system by the Western world.
Leonardo published a book called “Liber Abaci”, known as “The Book of Calculation”, which he published in the year 1202. The book included detailed examples on how to practically use these highly innovative calculations in every day uses like bookkeeping, weight and measurement conversions, human interest calculations, among many other things. The book was so well loved and received that we can feel the effects of its influence, even in today’s world.
Leonardo’s system completely overtook the previously used Roman numerical system and improved business calculation capabilities which led to an exponential growth of accounting and banking in the heart of Europe.
An interesting proposal within his book was based on an observation of a particular problem involving the growth of rabbits in ideal conditions. The solution to this problem was later found within a mathematical sequence of numbers which we now know as Fibonacci numbers.
Furthermore, this was not the first time these sequences of numbers were recorded. Historians had discovered documents by Indian mathematicians that were found at least 600 years before Leonardo discovered them himself.
The ratio of numbers, which we know as the Golden Ratio, was discovered by Phidias (Greek Architect) between the years of 500 BC and 432 BC and can be found in nature as well as human creations like architecture and trading systems, which we use to this day.
OK, enough of the history lesson…
While the math will most likely go over most people’s heads, it’s important to note that the Fibonacci sequence is found in the geometry of nature. You can find the sequence in things like animal skin, DNA structure, spirals within a seashell, and the list goes on.
This number sequence produces a ratio of 61.8%, which mathematicians will commonly refer to as the “Golden Mean”, which is a Greek term that is defined as a common ground between two extremes. However, we refer to it as the “Golden Ratio”, which can be found in many aspects of nature.
This golden ratio is often found within human responses as well. When asked to choose between two value neutral options, study after study has shown that the ratio is typically split between 62% and 38%, not 50-50. The 62% is labeled as the “Golden Ratio” which is found within our financial markets as well.
Most financial markets will reveal this Golden Ratio on both time and price periods in which a retracement of 61.8% is typically found after a 100% advancement.
So to sum it all up…
Fibonacci retracement levels refer to these simple areas of support and resistance that are typically found in human behavior, over decade’s worth of financial studies.
The Fibonacci levels that are used within institutional trading are 23.6%, 38.2%, 50%, 61.8%, and 100%. However, the Fibonacci levels more commonly used in cryptocurrency trading is 38.2%, 50%, 61.8%, and 100%.
The 50% level is not a Fibonacci level per say, but stems from Dow Theory’s assertion that averages often retrace half of their prior movement. Nonetheless, these are levels that you’ll find the most support and resistance around.
But, why are these levels important?
They’re psychological barriers that tend to repeatedly show up within the financial markets, time and time again. They are called inflection points where traders tend to anticipate a bounce or break off a resistance or support.
Another interesting aspect to Fibonacci levels are, the fact that the more people that use them, the more accurate they become. This tends to fall under the “self-fulfilling prophecy” paradigm.
The most important Fibonacci level, as you might’ve guessed, is the 0.618, Golden Mean level. This is a critical level where sellers tend to give up bargain-hunting and a potential mass buying frenzy will ensue.
These are great places to either buy upon a breakout or pull back to after an uptrend. Careful traders won’t make a move until the price is 5 to 10% above this Fibonacci level in order to confirm their speculation. This is a safe move since Fibonacci levels are not always precise.
The Fibonacci retracement levels are made up of horizontal lines which are used to highlight areas of expected support and resistance within crucial Fibonacci ratios. In order to create these levels, you’ll need to draw a trend line between the lowest and highest price of a particular trading cycle.
It’s up to a trader’s discretion to use wicks or candles when measuring the lowest and highest points. Whichever one you decide to stick with, make sure you stay consistent between charts.
This is a very popular tool among technical traders as it identifies places where they can strategically place price targets and stop losses. You’ll find more times than not that the market tends to either struggle near these Fib resistance levels or breakthrough and utilize the old resistance level as a new support .
Call it magic, or simply just some form of a self-fulfilling prophecy, but for some unknown reason, markets tend to move significantly towards these support and resistance levels.
One important thing you should note…
Fibonacci levels are not completely accurate. Use your common sense along with other indicators and trading patterns in order to solidify a game-winning trading strategy. Just because you buy at the 0.236 level doesn’t mean that the price is going to go up with 100% certainty. However, if you take these levels into consideration, you’ll have a much higher probability of winning trades.
Absolutely! In fact, it’s highly recommended that you utilize other trading tools and indicators alongside the Fibonacci retracement tool. If you find that other tools and indicators tend to overlap with the results of the Fibonacci retracement levels, this generally means that there is a fortified support and resistance to be expected.
This helps you better solidify your trading strategy.
What’s a Good Beginners Strategy to Use with Fibonacci Levels?
Fibonacci levels are very efficient at predicting a bounce off a big red candle, upon completion of a quick rally. These quick trades can generate a 20-40% profit if timed properly. This takes into consideration that once a rally has been quickly dumped, it will typically bounce back at a Fibonacci level near or around 0.618 or 0.786, before continuing to reach new lows.
Many traders, including myself, will use the Fibonacci retracement levels to decide where to buy into the next trading cycle. Remember that these levels are merely points of interest. Prices will not always reach one level or another but more often times than not, stay around the same ballpark area.
Indicators like volume and momentum are also extremely important to monitor in order to confirm these Fibonacci levels.
It’s also worth noting, that high volume markets are more likely to show retracement levels than low volume. Larger volume cryptocurrencies like Bitcoin, Ethereum, Litecoin, in any other cryptocurrency in the top 10 are more likely to show retracement levels than minor tokens.
Start practicing with the Fibonacci retracement tool today. Learn how to utilize it properly in order to maximize your trading success.
You might have heard that some professional traders don’t use stop losses. This might be all well and true; however you must also realize that they also have multiple years of experience under their belt. They’ve dealt with these stressful situations more times than you can probably count.
On the other hand, seems like everywhere you look, you see a ton of advice from other “so-called traders” telling you that you should never trade without a stop loss. With all the conflicting advice, which one do you choose?
As you can imagine, there’s pros and cons to each. Depending on your trading style (if you have one yet) and experience, this will vary from person to person.
Personally, I tend to lean more towards using stop losses than not. I’ve found myself losing a lot more money from not implementing these handy “safety nets”. Believe me; I’ve had my fair share of trades without them and none have turned out well.
With that said, this doesn’t mean that you shouldn’t explore your own trading style and see which one works best for you.
For those of you that are brand new to trading, stop losses are orders that a trader places at a specific price which automatically executes a buy or sell at a certain price point.
If you’re “long on a trade”, you would utilize a sell stop loss at a level below your buy-in price. This is what majority use along their trades. If you’re shorting a trade (margin trading) then you would set your stop loss as a sell order above your buy-in price.
One of the main purposes of setting a stop loss is to allow yourself to remove all emotions from your trading decision. It also serves a secondary purpose of not having to worry about watching over your position like a hungry jackal. Setting a stop loss will allow you to actually enjoy your life and walk away from the charts without your trade completely tanking.
In order to make a thorough decision on whether to use a stop loss or not, you should consider the advantages and disadvantages behind each one. If you decide against using a stop loss, I highly recommend you test this strategy on a demo account or with a very small amount of currency.
In many cases, traders don’t want to close a trade because they somehow think that the market will eventually reverse in their favor . The problem with this train of thought is, markets don’t typically move towards an individual traders favor, no matter how powerful you think your Jedi mind tricks are.
On the other hand, stop losses allow you to just “set it and forget it”. This gives you the freedom to walk away from your charts, have a life, work on other business matters, enjoy a hobby, exercise…. you get the point. In not utilizing stop losses, you’re essentially staring at charts all day. Setting alerts for key price points will still have you glued to your smartphone.
An apparent benefit to using a stop loss is the fact that it eliminates “trading discipline” which you might have not cultivated yet. No matter how mentally tough you think you are, it takes the willpower and mental fortitude of a triathlete. It’s tough to cut a loss once your trade has gone completely sour.
Keep in mind; you need to be confident in your trading strategy in order to stick to your original plan. Setting a stop loss and take profit will help you stick to your original game plan as intended.
Overview of Stop Losses:
A mental stop loss is referred to as a stop loss you “remember” to set before opening your trade. This is unlike a ” standard stop loss” which is manually set on a cryptocurrency exchange. A mental stop loss only abides by the rules you put into action “if” your trade moves below your buy in price. It’s only as flexible as your mind allows it to be.
A mental stop loss will test your trading discipline. Trust me, when those dips get deeper, that panic button starts to look more and more enticing.
However mentally strong you think you are, it’s nothing compared to the feeling you’ll get once that dip accumulates more sizable losses.
PRO TIP: I’ve typically found, once a major dip has occurred, a quick rebound in price action will follow. The real question is, will this rally lead you back to those tasty profits, break-even point, or merely soften the blow with a smaller one?
My advice is, take a look at the charts history and see what happened with previous dips. Which of the three options mentioned above, did the previous dips most often follow?
Set a trailing stop loss underneath each previous candle. I’ll typically move my stop loss in this manner, as to avoid a sharp reversal.
Cryptocurrency trading is an extremely volatile market. It’s been known to trigger stop losses on more than a few occasions. A short-term fluctuation could easily trigger a premature stop loss. This is why I highly recommend you set stop losses on a “per chart basis”.
Each chart comes with its own story. There will be a wide range of fluctuations that you need to analyze for each one.
Some charts tend to fluctuate 2 to 3%, others will fluctuate 10 to 15%. Always take a look at your charts history to view previous candlestick fluctuations, in order to decide on what range to work with.
Does it often dip 10% and rally for more prominent gains? Does it consolidate for several hours before an increase in price action? You can easily answer these questions for yourself by looking at your current charts history.
Another item you want to check before setting a stop loss is the order book. Order books show a list of orders from any given exchange which records the interest of buyers and sellers in the market at any particular time.
By analyzing buy and sell walls, you can get a good indication as to where to place your stop loss. Make sure to place your stop loss at least a few percentages behind a high buy wall, when trading on a long position.
This strategy paired with historical chart data, will allow you to formulate a more sustainable stop loss location.
Implement these variables into your stop loss strategy and you’ll lower your chance of triggering a premature stop loss.
There are going to be occasions where stop losses are triggered, no matter how strategic you are. Just remember, there’s no such thing as a perfect strategy. All you can hope to accomplish with any trading strategy, is to minimize your losses and maximize your potential gains. However, you’ll win a lot more of your trades than not, if you stick to this very simple, yet effective strategy.
Overview of Mental Stop Losses
Each chart has a different story to tell. Some may fluctuate wildly while others maintain a more consistent and stable support. Although mental stop losses have their time and place, I highly advise anyone who has less than a few years of consistent trading experience to stay far away from them.
Look at it like this…
Your time is much more valuable than the capital you trade with. If a dip continues deep into a bear market, you’ll have only two choices. Take a greater loss than you had originally intended or get left holding bags until the coin reverses and potentially reaches your buy zone again.
Waiting for your coin to recover can cost you a lot of time. Meanwhile, holding onto those bags will cost you a lot of time which you could be using on winning trades. This could be prevented if you had a standard stop loss in place.
Don’t trade your time for money. Get in, get out, and move onto another trade.
Good luck and happy trading!
Bear markets make a lot of money for investors and traders alike, the problem is… they just don’t realize it at the time.
You have to understand, the market has an ebb and flow nature to it. Just like most things in life, crypto markets are far from being excluded. If a crypto bear market has halted your altcoin trading, you were never truly a trader to begin with.
Any idiot can turn a profit in a bull market, however bear markets are what differentiates real traders from the wannabes. These are the times where knowledge, discipline, and profits are carved for those who can willingly handle them.
Any market you trade doesn’t need to move up in order for you to profit, it simply needs to move. As long as you can adequately identify the trend, you can walk away with a profit on just about any type of market. The shorter the trend, the greater the risk, the quicker the payday.
With that said, let’s take a look at the top 5 trading strategies you can use to turn a profit in a bear market.
#1 Margin Trading (AKA – Shorting)
Cryptocurrency exchanges like Bitmex, Poloniex, Bitfinex, and Okex (yes we got all the Xs in there) offer an incredible way of profiting in a bear market. A 10% dip can bring you anywhere from 10-50% profit dependent upon your leverage.
While it may sound a little crazy to buy at a peak (as opposed to buying the dip), margin trading can bring in massive profit if done right. You don’t have to become a professional technical analyst in order to do this. Mastering the basics of charting will be required in order to produce consistent profits with margin trading.
Studying chart patterns along with real-world experience will give you a good grasp on the basics of technical analysis. Once you accomplish this, you can pick your entry and exit points with confidence. This will allow you to have a better chance of buying near the top, right before the market turns red.
Crank up your leverage to 2-5X (I don’t typically recommend going over 5X) and you can find yourself sitting pretty in a bear market. It’s important to note that the higher the leverage, the quicker you will be liquidated out of your position.
For example: margin trading $1000 worth of coins at 10X leverage will completely wipe out your balance once you hit +10% (actually lower than that counting the fees). Be sure to keep this in mind if you decide to use a high rate of leverage.
The rewards for mastering margin trading can be great, but only for individuals who truly have a well-developed understanding on the basics of technical analysis.
Click here for our complete A to Z Guide to Margin Trading located here.
Regardless of which way the charts are moving, scalping will allow you to profit off those incremental movements on just about any chart. All it takes is a little willingness to grind it out for a few hours in front of your computer using frequent bid and sell opportunities during increased volatility. A bit too monotonous for you? Try using trading bots in order to automate this process once you get some experience under your belt.
Like any other trading strategy, scalping is not without its inherent risks. All it takes is one major dip to erase all your hard work for the day. So just remember, don’t get greedy. Walk away with 1-5% profit and keep a tight stop loss in order to prevent these inconveniences.
Low volume coins are typically not as affected (or not affected at all) with the plummeting price of Bitcoin. Unlike standard altcoins, which tend to follow in the same direction as Bitcoin, low-volume coins follow their own agenda. Consider anything with a daily volume below 50 BTC to be low volume (even 100 BTC in some cases).
There are a number of low-volume coins that you can scalp or swing trade in order to manage a nice sizable profit. If you’re going to go this route, use the same tips I outlined above for margin trading. Make sure you have a basic understanding of technical analysis and always set a stop loss (either mental or triggered stop).
With trading low-volume coins, you have another high risk/high reward scenario. Make sure when trading low volume coins, you have enough liquidity to get out of the trade when needed. I typically won’t trade a low-volume coin that has a daily volume of under 10 to 20 BTC.
The sweet spot tends to be around 30-50 daily volume of BTC. I can’t reiterate this enough, set a mental stop loss (or alert) just below a major support as most of these coins can drop 20% in under an hour (sometimes in under a few minutes). Make sure you keep a close eye on the chart once a major support has been broken. More often than not, whales (large investors) tend to short stop losses on support and then subsequently rally hard thereafter.
|PRO TIP: never scalp with 100% of your overall capital. You’re the only one who can determine your risk tolerance, but scalping with 5 to 10% of your overall investment is typically recommended.|
Start by visiting your favorite Reddit threads, cryptocurrency forums, or Facebook groups and see what ICOs are buzzing around the crypto sphere. Accumulate a list of ones you find interesting or have been mentioned several times on multiple venues. This is where you will accumulate your ICO list to further investigate.
Type each one of your ICO’s into Google and CoinMarketCap in order to uncover company information like development teams, whitepapers, twitter announcements, and other various chatter on the internet regarding your potential investment.
Next, take notes on the information you uncovered during your research and rate each ICO from 1 to 10 regarding how comfortable you feel with investing in each. Remember, investing in an ICO is risky business. You can lower that risk substantially by doing your due diligence and proper research.
Check out ICO Marks for the latest ratings on live and upcoming ICO’s.
If your crypto investments just aren’t paying the bills and the thought of looking at charts and doing technical analysis makes your head spin, perhaps you need to look at another route.
Getting paid to do freelance work in cryptocurrency may be right up your alley.
There seems to be an increasing amount of jobs where employers are looking to pay their employees in cryptocurrency. Take advantage of these employers as you can most likely get 10-30% more profit out of the same job you would get paid for with standard fiat currency.
Check out our list of cryptocurrency job sites below…
Ethlance – one of the more popular cryptocurrency freelance sites. They pay in ether and have 0% service fees.
Coinlancer – a blockchain based freelancing peer-to-peer decentralized job market platform.
XBTFreelancer – employers pay for freelancers in Bitcoin. They tout low service fees.
CryptoGrind – much like standard freelance site, CryptoGrind offers a “Bitcoin escrow” to ensure that employees receive payment for services provided.
Jobs4Bitcoin – a Reddit job board with employers looking to hire all facets of cryptocurrency freelancers and various blockchain job positions.
I didn’t add this to my “Top 5” list as this won’t proactively create income for you in a bear market however it will prevent you from losing more money than you should.
|One of the biggest mistakes people make, on a daily basis, is not stepping away from their computer or smartphone. In this constantly demanding digital era we live in, the obsessive barrage of technology can literally drive you mad. This slow and repetitive process can disrupt the logical mechanism of your brain, which will inherently screw up your trades. That’s why it’s very important to make sure you unplug from these devices from time to time.|
Just taking an hour to exercise, walk in the park, or enjoy your favorite recreational activity can be enough to reset your mind to a state of balance. We tend to spend so much time in front of our computer screens that tunnel vision starts to set in. When this happens, we make more mistakes than we should. Realizing, not doing anything can make you money by inherently not allowing yourself to make foolish mistakes, therefore losing the capital you worked so hard to make.
Always maintain a good balance of work, rest, exercise, and play. Wake up every day with a clear goal in mind while maintaining balance in your life. Realize this balance is imperative to obtaining the results you want. With this knowledge; you can survive anything… even the most bearish of markets.
If you found this guide interesting, please leave a comment below. I’d love to know what what my audience does during these bearish markets.
Reversal patterns are the closest thing you get to a crystal ball when it comes to predicting trend reversals within the volatile world of crypto trading. Once you start timing these patterns consistently, you’ll gain an uncanny advantage over your trades. A well timed trade off a reversal pattern can make the difference between making 5% on a trade or 50%.
It doesn’t matter if you’re trading Bitcoin, various altcoins, or any other asset. Reversal patterns are an extremely important part of any traders skill set.
This guide will be covering 6 of the most widely used reversal chart patterns. Learn to recognize these bad boys for a well-placed trade that will leave you “head and shoulders” (pun intended) ahead of the pack.
Common Reversal Trade Patterns We’ll Be Discussing
Head and Shoulders Reversal Pattern
One of the more popular reversal chart patterns is the bearish formation known as head and shoulders. As you might’ve guessed, the pattern resembles a raised head with two matching shoulders on each side.
The bottom of the left shoulder should always be drawn across to the bottom of the right shoulder. The neckline serves as an area of support which the price will eventually drop below.
When the price drops below the neckline of the right shoulder, the pattern is considered complete. After completion of the pattern, price will most likely proceed lower off the right shoulder towards a bearish breakout.
Head and Shoulders Overview
Trend – Bearish
Signal confirmation – when the price drops below the neckline on the right shoulder.
Pattern target – tends to break out below the bottom of the right shoulder.
Percentage pattern hits target – 62%
The inverse head and shoulders is a common bullish formation which, as you might’ve guessed by now, predicts the reversal of a downtrend. As the name implies, it resembles an upside down head and shoulders.
The top of the left shoulder should always be drawn across to the top of the right shoulder. The neckline serves as an area of support which the price will eventually rally above.
Once the price drops above the neckline of the right shoulder, the pattern is considered complete. After completion of the pattern, price will most likely proceed below (moving upward) the right shoulder towards a bullish breakout.
Inverse Head and Shoulder Overview
Trend – Bullish
Signal confirmation – when the price drops above the neckline on the right shoulder.
Pattern target – tends to break out below the bottom of the right shoulder (moving upward).
Percentage pattern hits target – 75%
The double bottom is a bullish formation that is frequently found at the end of a bear market. It predicts the reversal of a current downtrend and commonly resembles the “W” shape. The shape is formed by two consecutive dips that have roughly around the same lows that are separated by a peak.
The patterns neckline, which is drawn above the middle peak, acts as an area of resistance which must be broken through. The reversal pattern is complete once the price rises above this neckline, indicating a bullish rally.
Double Bottom Overview
Trend – Bullish
Signal confirmation – when the price rallies above the peak between the two dips.
Pattern target – tends to break out above the peak towards bullish rally.
Percentage pattern hits target – 65%
The double top is a bearish formation that is frequently found at the end of a bullish market. It predicts the reversal of a current uptrend and commonly resembles the “M” shape. The shape is formed by two consecutive peaks that have roughly around the same highs which are separated by a dip.
The patterns neckline, which is drawn below the middle dip, acts as an area of resistance which must be broken through. The reversal pattern is complete once the price falls below this neckline, indicating a bearish trend.
Double Top Overview
Trend – Bearish
Signal confirmation – when the price dips below the valley between the two peaks.
Pattern target – tends to break out below the bottom of the right peak to breakout towards a bearish movement.
Percentage pattern hits target – 74%
This bearish reversal pattern predicts the reversal of an uptrend and is sometimes referred to as an Inverse Saucer. This pattern is more easily found under the long term reversal patterns which typically last weeks or even months.
Rounding Top Overview
Trend – Bearish
Signal confirmation – price exceeds below the right bottom of the saucer.
Percentage pattern hits target – 27%
This bullish reversal pattern predicts the reversal of a downtrend and is sometimes referred to as a Saucer Bottom. It’s also easily identified by its “U” shape. This pattern is typically found under the long term reversal patterns which last weeks or even months.
Rounding Bottom Overview
Trend – Bullish
Signal confirmation – price exceeds above the right top of the saucer.
Percentage pattern hits target – 60%
These reversal chart patterns are not too hard to recognize once you actually remember to look for them. Look over a few of your favorite cryptocurrencies here, and see if you can spot a few reversal patterns I’ve mentioned here within this guide.
These powerful cues will help you forecast dramatic shifts within the supply and demand of any cryptocurrency. Reversal patterns are a very important tool to add to your cryptocurrency trading skillset, so learn them, love them, and use them.
Traders use technical indicators to figure out both long and short term price direction of an asset. They can measure anything from momentum, volume, quality of price movement and so much more. They are mathematical calculations or ‘signals’ used in technical analysis to determine what may happen next with the price of a security, commodity, stock, currency, or in our case cryptocurrency.
Some traders prefer to rely on historical price/volume data to predict the price movement rather than fundamental indicators like profit, revenue, or turnover.
Nevertheless, after reading this article, you’ll have a better overall understanding on how the top six indicators are used. You should also be able to identify the trends in prices, for any cryptocurrency you’re currently looking to trade.
Within this guide we’ll discuss the following Technical Indicators:
Relative Strength Index
Relative Strength Index (RSI) helps you quantify the gains and losses of an asset over a fixed period of time. This is one of the better-known indicators known throughout the crypto trading community. It’s used by both beginners and advanced traders alike.
RSI ranges from 0 to 100 and helps you figure out if an instrument is overbought or oversold. If an asset’s RSI is ticking around 70, it is overbought while anything below 30 means it is oversold.
It will also help you determine if your cryptocurrency is within a bullish or bearish phase. Anything below 50 is considered bearish. As you might’ve guessed, anything above 50 is bullish. If movement tends to fluctuate between 0 – 50 for an extended period of time, it’s in a bearish cycle. If movement fluctuates between 50 – 100 it’s currently in a bullish cycle.
Crypto traders also use a two-line momentum indicator called the stochastic oscillator to measure the difference between the closing price and the range of prices over a defined period of time. Typically, the Stochastics Oscillator uses the past 14 day’s prices to arrive at a score.
A score above 80 signifies the asset is overbought and a score below 20 means it is oversold. Stochastic Oscillator’s scale runs on a scale of 0 to 100, just like the RSI.
The %K and %D are the two defined lines in this chart. The %K line tracks the asset’s momentum and %D traces a three-day simple moving average of %K. Typically, the best buy and sell times are indicated by %K line cutting over or under the %D line.
Another famous indicator used by traders is called the Moving Average Convergence Divergence (MACD). This signal is used to predict beginning of a short-term price trends and the reversals of a security. To calculate the MACD, subtract the 26-day exponential moving average (EMA) of a cryptocurrency from the 12-day EMA.
MACD signal is said to be positive when the 12-day EMA is above the 26 days EMA. This indicates the momentum is rising i.e. it is time to buy. When the longer term moving average is above the short term average, you should sell since the momentum is moving downward.
Apart from the MACD, some traders also track the ‘signal’ line, which is a 9 days EMA to help them identify the buy/sell calls. When the signal line is breached in an upward move, it indicates a bullish run and MACD running below the signal tend to indicate a bearish movement.
This indicator is used to detect the quality of a price movement. The ADI has a score range of 0 to 100 and is considered to be a non-directional signal. i.e it does not show a specific direction in the price movement. It is used to determine the strength of an upward or a downward momentum.
If the ADI gives a reading of over 25, traders consider that as a time to implement trend-trading strategies while a score below 25 indicates the opposite.
ADX Reading Strength
This indicator scale is set from -100 to 100 and is used to predict when the momentum of a security changes direction. Cryptocurrency traders believe the Aroon Oscillator is a versatile tool since it signals both the direction of the price movement and its strength.
A score above 0 indicates an upward momentum. The strength of the signal can be identified by the value of the AO reading. For Example, a security with an AO value of 10 is weaker in comparison to that of another security 50. Both are in a positive upward trend.
Following in the same lines, any score below 0 indicates a negative trend, i.e downward momentum. A change in the direction of the AO indicators signifies the reversal of the price direction.
Traders also use On Balance Volume (OBV) to predict the price of an asset based on the change in the volume of its transactions. On Balance Volume is a cumulative indicator and is a running total of positive and negative volumes.
The premise being that any dramatic shift in volume will indicate a future change in the price of an asset.
If the volume rises steadily with no change in price, the OBV indicator will rise and predict a price increase in near future. In case of OBV is decreasing while the price stays steady, it indicates an upcoming price fall of an asset.
Crypto traders use these Technical indicators to get a deeper insight into the price action in order to help them predict the future position of any particular cryptocurrency.
These indicators are mathematical functions that dig deep to find the co-relation between the price and volume shifts. When multiple indicators are used together, it is easier to forecast the price movements.
Now that you’ve got a good understanding on what these indicators are for, head on over to our technical analysis page and give them a try.
If you enjoy this article, check out some of our other technical analysis articles:
When you first start building your cryptocurrency portfolio, the number of coins you can choose from is a bit overwhelming. There are countless coins out there, so the big question is, which ones do you choose?
There are numerous strategies for choosing coins and building a killer portfolio that even Warren Buffet would be jealous of. Start by following a few fundamental tactics, in the beginning, in order to minimize your risk while learning.
Fortunately, I’ve developed this well-rounded, easy to read guide in order to ensure that your cryptocurrency investing experience is a profitable one. Done properly, you’ll have enough of those shiny crypto coins to buy you that lambo that everyone keeps annoyingly shouting about.
One great way to minimize your risk investing in cryptocurrency is to ensure that you diversify the coins within your portfolio.
First thing you want to do is take a look at the market cap of a few select cryptocurrencies you’re interested in. If you’re not familiar with what a market cap is, the easiest explanation is, a coins price multiplied by its circulating supply. Pretty simple right?
Remember the higher the market cap of a coin the less volatile it is. On the contrary, lower market cap coins are more volatile and have higher percentage swings. A more “diversified” portfolio contains a mix of these high to low market cap coins.
Let’s group these into three categories…
Bitcoin, Ethereum, Bitcoin Cash would be considered large market cap coins. They may not experience 40 to 50% fluctuations like some of the smaller altcoins, however their price generally tends to be more stable during bear markets.
Your risk tolerance will play a major factor on which coins you decide to diversify in. If you already believe that investing in cryptocurrency is an extremely risky endeavor, you may want to consider investing 90% of your portfolio in large market cap coins.
On the other side of the fence, if you have a lot of disposable income and wouldn’t be too upset if you ended up losing some of it, you may want to invest in riskier low cap cryptocurrencies.
These coins have an extremely high profitability rate of 100 – 500% ROI, however it is worth noting that many can hold no value over the long haul. The ones that do end up being extremely profitable tend to outweigh the ones that don’t.
As you can probably guess by now, a moderately safe investment strategy would be to invest in all 3 market cap coins, evenly spreading out the investment percentages among each one (34% large cap, 33% medium cap, 33% low cap).
Sometimes it pays to go against the grain and hunt for those hidden gems. Some of the best coins to invest in are the ones most people aren’t really focused on.
However, discovering these hidden gems can be quite the time-consuming process. You can spend days of research, as well as looking through countless whitepapers in order to uncover 1 or 2 hidden gems. Even after reviewing over 50+ coins, this can result in a single cryptocurrency worth investing in.
With that said, those one or two coins could turn your stagnant portfolio into an ultra-successful one. Let’s take a look at a few key examples:
Taking these examples into consideration, you can clearly see that spotting these hidden beauties can earn you a massive return. If you have the time to research, investing in these gems could really pay off.
Another important aspect to building your portfolio is considering the industry in which your coin is in. These are often referred to as a utility of the coin. Check out a few examples of the various types of utilities you can group most of these currencies in:
Blockchain is still in its infancy so it’s a bit difficult to predict which industries will accept the new technology. The list above is just a few of the categories in which you can spread your investment into. Remember some of them even overlap industries.
The main point of this strategy is to not overly invest in one particular industry. If for some reason a particular utility ends up being left behind, you don’t want to be left holding all the bags within that group.
This might seem like common sense to some of you, but investing in industries that you’re actually interested in is a great strategy to stick with.
Some novice crypto investors believe that only one coin per utility will win . That couldn’t be any further from the truth. In order to prove my point, take a look at some “real-world” industries.
and the list goes on. Every industry is large enough to support multiple game changing cryptocurrencies. Many may die off, however quite a few will survive.
Remember, a cryptocurrency doesn’t necessarily need to be in the top three or four of its industry in order to return a massive profit. The great thing about this industry is, if your currency is ranked number 10 within its utility group, you can still see 100-300% profits.
Along your journey to cryptocurrency riches, you’ll find a number of other tactics and strategies that fit well within your trading portfolio. You’ll also more than likely take action on advice that absolutely sucks.
Becoming a cryptocurrency trading pro is a learning process that can only be mastered with real world experience. Each investor has his own personal style which will be cultivated over time with more experience. Just remember to be open, optimistically skeptical, and enjoy the journey.
A major part of technical analysis is determining whether to buy in or sell out of a formidable crypto trade. Kenny Rogers always use to say, “know when to hold em, know when to fold em, know when to walk away, and know when to run”.
If you’re under 25, you probably have no clue what the hell I’m talking about, so just disregard my 80’s reference or go ask your dad.
These crucial chart patterns help traders forecast future price movements. It doesn’t matter which coin you’re trading, these bad boys show up all over the charts.
Continuation chart patterns DO NOT predict the future (wouldn’t that be nice). However, they do help with locating the “probability of movement” within a particular trend. I promise these powerful buy and sell signals will help you make much more accurate investment decisions. Scouts honor!
Study the chart patterns I outline for you below. If all else fails, we can always fall back on the Dolorean and predict our way to crypto riches.
As stated above, continuation chart patterns will tell you whether price movement is going to continue moving up or down within a prevailing trend.
For example, if price movement of a downtrend trend shows signs of a continuation pattern, what do you do? If you guessed, “buy in” then keep reading. The correct answer would be…wait until a reversal pattern emerges. Alternatively you can just move onto another trade.
So let’s start things out with 6 of the more popular continuation chart patterns. Study each as if there will be a test at the end of this guide.
This continuation pattern depicts sideways price movement between 2 horizontal trend lines (support and resistance) along a strong uptrend, which generally results in an overall uptrend continuation.
In order to be defined as a true bullish rectangle, price movement should touch each trend line at least two times on both support and resistance. Upon doing so, the price action should break the top trend line of resistance. Investors want to purchase the cryptocurrency when the price action closes (candlestick close) above the upper trendline.
This continuation pattern depicts sideways price movement between 2 horizontal trend lines (support and resistance) along a strong downtrend, which generally results in an overall downtrend continuation.
In order to be defined as a true bearish rectangle, price movement should touch each trend line at least two times on both support and resistance. Upon doing so, the price action should break the bottom trend line of resistance. Investors may want to short the cryptocurrency (refer to margin trading) or sell the coin at this position for a loss.
This bullish continuation pattern is depicted by a right triangle which is created by two trend lines. The bottom trend line is drawn horizontally upward, where support prevents the price action from breaking through.
The top trend line is represented by a horizontal level which prevents the price from breaking through this resistance. Once this resistance line is broken, upward price momentum is expected to continue.
This pattern showcases that the demand for the crypto coin is increasing over time.
The bullish continuation pattern is depicted by a right triangle which is created by two trend lines. The bottom trend line is drawn at a horizontal level where support prevents price action from breaking through.
The top trend line is represented by a downward horizontal line which prevents the price from breaking through this resistance. Once this resistance line is broken, downward price momentum is expected to continue. It is recommended to sell here.
This pattern showcases that the demand for the crypto coin is weakening over time.
This continuation pattern resembles a flag at the top of a pole. The bullish flag is a short-term continuation pattern which tells you that a temporary market consolidation is occurring before a continuation of an uptrend.
Within the pattern, the flagpole is represented by the sudden vertical spike in price as the flag portion is represented by a temporary downward consolidation against the uptrend.
Typical bullish flags are angled downward from the predominate trend, however on occasion it can be angled upwards. The continuation pattern is complete once price action breaks above the upper resistance trendline.
A typical price target is measured by adding the length of the flagpole to the price associated with the bottom of the flag.
This continuation pattern resembles an upside down flag. The bearish flag is a short-term continuation pattern which tells you that a temporary upward market consolidation is occurring before a continuation of a downtrend.
Again, the flagpole is represented by a sudden vertical dip in price as the flag portion is represented by a temporary upward consolidation against the downtrend.
Standard bearish flags are angled upward or sideways from the dominant downward trend, however on occasion it can be angled downward. The continuation pattern is complete once price action breaks below the lower trendline of support.
A typical price target is measured by subtracting the length of the flagpole to the price associated with the top of the flag.
You did it kiddo! You studied your ass off right? You ready for the big leagues now? Don’t get to far ahead of yourself…..there’s more.
This is where the rubber meets the road. Apply these patterns to your favorite trading chart before claming your fame. Head on over to our Tradingview charts and get started on a few while it’s still fresh on your mind.
Once you’re comfortable with recognizing these patterns, throw a few dollars at your favorite exchange (whatever you can manage – start slow). See if you can win a few rounds within your own crypto trading challenge.
Remember young grasshoppa, practice doesn’t necessitate real world experience, but it sure as hell helps!
If you enjoyed this guide, leave a comment below. I’d love to hear from you and the experiences you’ve had along your crypto trading journey.
Over the last few years cryptocurrency has not only gained a lot of attention in the media, but also more trust and curiosity from investors, banks, governments, and corporations. Even though it was initially met with cynicism, more and more investors and companies are moving toward the utilization of cryptocurrency.
This digital currency seems to be much more fitting for those of us living in the digital age as opposed to our antiquated fiat currency. When compared to the longevity of fiat, the 9 years that Bitcoin has been active seems like a blip on the radar. Regardless of what your stance is on the cryptocurrency, the blockchain technology behind it is here to stay.
It’s also much more likely that cryptocurrency has solidified its position as an international currency over any other previous currency in history. It should not be taken lightly as an asset and will surely be around a lot longer than most have predicted.
One of the key characteristics of the cryptocurrency market is its volatility in price. Have you ever wondered why the price of cryptocurrency, whether it Bitcoin or Ethereum, tend to fluctuate so much? We’re here to explore those aspects of volatility and what drives market prices one way or another.
This characteristic of volatility is easy to understand. Each time the government passes a law or publishes statements regarding how to regulate cryptocurrency, the price of the asset is bound to mirror an effect in price. For instance, heavy regulation tends to push people into selling their coins, thereby causing a downward pressure on the price.
Even new regulations that aren’t specific to cryptocurrency, but adhere to a general financial action by the government, may also be translated into fluctuations.
An example of this could be a financial crisis suffered on Wall Street which would inherently affect the crypto world as well. Whether it would positively or negatively impact the crypto market depends on many different variables
There is an inherent anonymity behind cryptocurrency. This has been the primary reason why the currency has garnered so much popularity. With recent popularity, more and more governments are pushing to impose rules to end anonymity and increase transparency as well as regulation. If this occurs, cryptocurrency prices are bound to be affected.
User trust is an important factor in determining the price of any financial asset. By trust, we mean whether or not individuals believe that the currency will be able to sustain its purchasing power in the future.
As an example….
Imagine that you invested in Ethereum, but as the months pass you expect the value of your investment to likely decrease in the nearby future. This could be due to media, government regulations, or a host of other factors. These outside forces will more than likely reduce the trust you have with your particular currency.
So what do you do?
If you’re a new trader or investor the chances are high that you’ll likely sell. You might make this choice because you don’t trust that your shares of Ethereum will have the same value it currently holds in the future.
If there are a lot more people like you who sell their investment today due to this news, they will also garner a “lack of trust” in Ethereum or even cryptocurrency as a whole. You will inherently drive the price of the currency down, thereby playing an integral part in the currency’s inability to preserve its future purchasing power.
Trust is extremely valuable within the crypto sphere. Always remain calm and headstrong before you make any decision to sell, as more times than not, the market will change and the price of your sold cryptocurrency will rise well above the market price you purchased at. Many of us call this “seller’s remorse”.
Trust was one of the reasons Bitcoin was able to rise to an all-time high back in December 2017 to 20k. Another major reason why cryptocurrency is valued at such a high price is due to the fact that it cannot be hacked due to the blockchain technology in which it operates on. However, be very aware that this still doesn’t mean that hackers won’t be able to hack an exchange and obtain access to your online wallet. Fortunately, most reputable crypto exchanges are insured against these types of scenarios. Most users are compensated for their losses.
Also note that most of the Top 10 cryptocurrencies are expected to exponentially gain value over time. Many newer cryptocurrencies have exponentially increased their value within a year, so keep that in mind before you start to panic sell.
Cryptocurrency once had a humble beginning. While they are valued at a much higher price today than they were several years ago, this was not always the case. What brought this onset of new found value? The rising demand and mass adoption of blockchain technology has made a profound affect on the value of cryptocurrency. The viral exposure on social media, news, TV shows, movies, as well as word of mouth also inherently relay value to the digital coin.
Cryptocurrency has been gaining momentum since its inception. This coupled with the fact that more technologically advanced countries like China, Japan, and South Korea are starting to utilize it within their everyday commerce.
More and more people every year begin to understand why cryptocurrency is such a beneficial investment. They realize how much of a lucrative opportunity it is and as a result, the popularity of cryptocurrency, especially Bitcoin, has gone through the roof. The law of supply and demand dictates, when demand increases while the supply stays constant, the price will inevitably rise.
Remember, almost all cryptocurrencies are available in a limited amount. When there is an increase in demand, it’s soon followed by mass adoption. While more investors enter the market, the price further increases. This trend is expected to continue as cryptocurrency is still a hot topic in most countries.
Speculators exist in every facet of the financial market, and cryptocurrency is no different. Speculation regarding the future value of any particular coin can be derived from the news or other venues like social media and online forums.
For instance, if the liquidity of a particular cryptocurrency were to increase, speculators would deduce that more people are likely to buy. This would translate to an increase in prices. This speculation could have some investors purchasing a particular coin today in order to sell it tomorrow at a profit. This single action is what would drive the prices upward, thus creating a “buying frenzy”.
On the other hand, news regarding how much more effective another cryptocurrency is, compared to say Bitcoin, can lead to a decrease in Bitcoin’s price before the newer currency even hits the market.
Why? Speculation my friend, speculation.
Speculators will expect the new cryptocurrency to drive the price down. Traders will begin selling their investment before its release in order to get a jumpstart on the market.
Speculators might be responsible for the initial decrease in prices, however “the herd” (trend followers) would cause it to exacerbate. Not everyone understands what they are doing. If everyone else is selling their investment, “the herd” will follow. This mentality is what governs a further decrease in price. This event can also be referred to as “panic selling”.
It’s hard for any financial asset to avoid price volatility caused by speculators. However, since cryptocurrency is largely unregulated and can inevitably deliver its investors high returns, the effects of speculators are felt much more prominently.
As long as the stock market has been active, news and other media outlets have always played a major role in price fluctuations. This is also a common occurrence with cryptocurrency, however it can generally be more pronounced.
News regarding crypto related bankruptcies, hacks on crypto exchanges, government regulations, delays in service, issues with crypto technologies, can cause an immediate disruption with any particular cryptocurrency.
Media influence can sometimes reflect a more negative “opinion” on some less reputable media outlets. These FUD syndications may release false information in order to decrease the value of a particular cryptocurrency. Negative news which is found to be primarily false is commonly referred to as FUD (Fear, Uncertainty, and Doubt). Be very careful when falling into this inevitable trap. Always do your own research (DYOR) and check other credible use sources for comparison.
If you’re not familiar with the term “whales”, you’re obviously very new to any form of trading or investing. That’s okay, you’re here to learn right?
The term is commonly referred to as an individual (or group e.g. corporation) who buys or sells large amounts of cryptocurrency, thus greatly influencing the trend of that particular market. These are also referred to as “market makers” and can be found within any trading marketplace (forex and stocks).
As you can imagine, these individuals maintain a lot of power within the market. These titans of the industry may sell a large amount of cryptocurrency, only to take advantage of other “panic sellers” who will inevitably liquidate their digital asset. Once the time is right, they’ll buy back that currency at a lower rate. This is standard protocol for these types of traders.
There’s nothing that you can do to stop this from happening other than recognizing when it’s happening and ride the trend which the whales are currently dictating. Having a fundamental understanding of technical analysis can also help you spot these trends and take advantage of them before they happen.
There are many factors that determine the price of cryptocurrency. The ones mentioned above are just a few of the main culprits. Remember, not only does each factor play a significant role in determining the price of a cryptocurrency, but two or more can wreak havoc.
Just be careful that you’re not on the other side of these renegade dips. Stay current with daily crypto news. Make sure to follow your cryptocurrency investment on Twitter in order to help you keep an up to the minute pulse on the latest developments.
Overall, most of the Top 10 cryptocurrencies located here will increase in price over time. This is true even after weekly (or sometimes monthly) volatility in price is experienced. Understanding how these factors work will allow you to be in a much better position to realize when to buy or sell your digital asset. Understanding how this process works, along with personal experience, will give you a fundamental edge over the so called “herd”.
No matter what anyone’s ever told you, producing a steady income trading takes time, experience, dedication, and a lot of emotional grit. However unlike traditional markets, you can make money much faster trading cryptocurrency (and lose it just as fast) due to the markets volatile nature and low barrier of entry.
There are two vital aspects to become a successful crypto trader. Obtaining a solid understanding of technical analysis and managing your own emotions. I would go so far to say that the emotional aspect of trading is a bit more difficult, however we’ll dive more into that aspect of trading in another guide.
Let’s talk technical analysis and some of the most basic crypto trading indicators you’ll need to learn, in order to get a grasp on what you’re doing.
Technical analysis (AKA – TA) is a representation of price and trading volume over time, using an easy to read graphic representation of candlesticks. These candlesticks form patterns over time which traders commonly referred to as chart patterns. These patterns represent mass psychology over a group of traders during a set period of time.
The only other option you have to make sense of all these varying numbers would be for you to calculate volume and price on a linear scale over time. Take that number and multiply it by pie over distance. Easy right?
For the 99% of us that aren’t math geniuses, charts and technical patterns are what we have to revert to in order to make sense of it all. Without it, our brain would clench up faster than doing multiple trigonometry problems on 8 cans of red bull.
Ok, you get the point, moving on….
There are two types of research methods that you want to be familiar with before attempting to make any trade; technical and fundamental analysis.
Fundamental analysis is focused on aspects of of a cryptocurrency like the development team, utility of the coin, white paper current investors, etc . The latest news, and rumors surrounding your potential coin can also be factored into fundamental analysis. All these play a major part on the value of any cryptocurrency.
You’ll find our live charts page to be an all-in-one resource to for all your fundamental analysis needs. We cover cryptocurrency whitepapers, official crypto websites, social media accounts, blockchain info, and more. We everything you need to know, in order to make a well informed buying decision.
Before we go covering the details of technical analysis, remember that price movements on a given chart are rarely ever random. They often follow a trend, both long or short term, depending on the timeframe you are looking at.
The term trends, within the trading community, are not some new pair of $100 stone washed Justin Bieber jeans you decided to purchase because your girlfriend thought they were cute. These trends refer to the mass psychology of a group, in order to obtain increased price movement, through the analysis momentum in a particular direction.
The “group of people” (or herd) were analyzing, always follow certain patterns and react to certain price levels. These can be predictable to those who know what to look for. This…my friend, is what technical analysis is all about.
In order to be a one of the great crypto traders of our time, you’re going to need to recognize certain trends as well as chart and candlestick patterns. Also worth noting, trading indicators (RSI, MACD, Stochastics) are a great way to verify your TA strategies.
Got it? Good! Let’s move onto….
One of the more simple indicators to identify in your early stages of your trading career are support and resistance lines. Trading patterns are always made up of of these two fundamental levels.
Support is when you have more than two candlesticks that touch a particular price level towards the bottom of a trend. These tend to touch and bounce off support, thus moving up towards the top of the price level. These are known as resistance levels. A single bounce off support and resistance is known as a cycle. The more candlesticks that touch your support and resistance, the stronger they are. Let’s take a look at a strong support and resistance.
As stated above, you need at least 2 touches of a candlestick, within a cycle, in order to claim any sort of support or resistance. I typically look for at least 3, in order to be more confident about a certain level.
Ok, now that we’ve covered support and resistance levels let’s move onto trend lines.
The only major difference between support and resistance lines are the fact that trend lines tend to be drawn in a diagonal direction. Support and resistance are drawn with straight horizontal lines.
When it comes to trading, a picture is definitely worth 1000 words. In order to better conceptualize trend lines, let’s have a closer look at both rising and falling trends.
Much like the support and resistance lines, you want to make sure you have “at least” 2 or more touches off a candlestick in order to consider it a trend. The more the merrier.
Trend lines can also move sideways, which we typically label as a “consolidations”. You also have short, intermediate, and long term trend lines depending on the timeframe of the chart you’re looking at.
Time to step your game up a little and start getting acquainted with more technical aspects of trading like moving averages.
|Moving averages are generally used to simplify trend recognition. These moving averages are based on the average price of a coin over a designated period of time.
You can calculate moving averages to show the average of any group of candles, but most traders calculate these averages over a period of 10, 20, 50, 100, and 200 timeframes (minutes, hours, days). The one I personally use the most is the 50 Day Simple Moving Average (SMA).
There are also two types of moving averages you can use, exponential or simple moving averages, depending on how broad or narrow you want your insight to be. I recommend using both. Let me explain…
There are certain strategies for each, however to be more specific, exponential moving averages give higher weighting values to recent prices, whereas simple moving averages assign equal weighting to all values.
To put it in layman’s terms, SMA will give you a broader overview of where a trend is at and EMA is best used to make quick judgment calls on more recent price action and trend reversals.
I like to use a 50 day moving average on all my charts. These allow me to quickly tell whether a trend is currently in a bear or bull market within the timeframe I am viewing.
Anything below the 50 day moving average tells me that the trend is currently in a short or long term bear market. If the candlesticks are above the 50 day moving average, you’re in a bear market trend. Knowing which trend you’re in (both long and short term) will allow you to better formulate a strategy moving forward.
Exponential moving averages (EMA) will help you decide if a trend is about to reverse within a short term timeframe. Many traders use different EMAs, however the one that I found to be the most useful are the 13 and 34 day moving averages.
Here is the basic strategy behind EMA …
As you can see, as soon as any of the lines cross, a substantial shift within the trend can be seen. This combined with a few other indicators to help substantiate your trading strategy, will help you form a profit maximizing trade.
Next, let’s talk about a very important indicator that all traders use… volume.
Trading volume plays a crucial role in identifying whether a trend is weak or strong. Strong trends with high trading volume will always be accompanied by long candlesticks. The same goes for weak trends. These will be accompanied by short candlesticks.
Let’s break this down and structure it appropriately…
– If you have several long candlesticks along the volume indicator, this indicates a strong trend. If most of these are green, that would indicate a strong bullish trend. The opposite goes for red candlesticks indicating a strong bearish trend.
Pretty simple right? Exactly! This ain’t brain surgery folks. Volume indicators are really simple to understand.
Don’t be lured into the always present debate between fundamental and technical analysis. Many novice traders tend to choose sides between these two research powerhouses. They believe one is ultimately better than the other.
This couldn’t be any further from the truth. You should be asking yourself….why choose one method over the other, when you can choose both right?
Using technical analysis (TA) as well as fundamental analysis (fundamentals) will equip you with the prophetic knowledge you need to culminate a precise trading strategy that you can actually feel good about.
Technical analysis will give you a practical way to measure past price movements and their corresponding trading volume. This is vital knowledge you’ll need when considering a trade.
Fundamental Analysis will empower you with significant insight regarding the current cryptocurrency conditions. Everything from current news, rumors, and future developments will play a crucial role in your decision when using fundamental analysis.
Combine these two powerful research techniques into one highly effective trading strategy.
Utilize fundamental analysis to dictate which coin is worth investing in, while tightening up your strategy when you’re ready to trade, by finding a good entry point with technical analysis.
In order to get started, we’re obviously going to need to get familiar with a trading chart to plot out some beautiful technical analysis strategies right? You can start by utilizing our free chart here, however there will come a time when you need more than what this free solution has to offer (like alerts, more indicators, etc).
This is why I highly recommend TradingView for all your trading and chart plotting needs. TradingView offers a lot more than just charts. They include a massive selection of experienced traders you can follow and learn from. Take a look over expert trade setups on a number of coins and learn from real life application.
It is the quintessential social media platform for all traders, both novice and experts alike. They also have a very comprehensive traders reference guide that you can study if you ever want to expand your knowledge on the field. Reading up on trading ideas about various indicators, chart patterns, candlestick patterns, and then viewing them on live trades really helps.
I highly recommend starting with the Pro plan to start. If you need more indicators and alerts on down the line, go for the Pro+.
This guide has presented you with the basic concepts behind technical analysis. I highly recommend you practice using the indicators and patterns I covered above. Once you’ve got a good handle on them, move on to more advanced charting patterns. I’ll go over these within another guide.
Now get out there and start charting!
Go on….you can do it! Don’t just let your dreams be dreams!
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Bitmain Opens 20,000 Square Foot Office in Silicon Valley The cryptocurrency industries largest crypto mining company, Bitmain, just opened their new office in Silicon Valley ahead of its planned Initial Public Offering (IPO) later in
Boeing to Use Blockchain Tech to Track Unmanned Air Vehicles for Future Flight Industry Boeing, the the world’s biggest aviation company, recently announced their intention to tap into blockchain technology by utilizing it for their
BitPay Becomes the First Crypto Payment Processor to Obtain a BitLicense BitPay, the cryptocurrency payment processor, has become the 8th firm to receive a BitLicense from the New York Department of financial services (NYDFS), which
The World’s Largest Asset Manager, BlackRock, Seeks Potential Interest in Bitcoin Futures BlackRock, the world’s largest asset manager announced the formation of a working group to assess the potential involvement in Bitcoin. This reported by
Swiss Stock Exchange (SIX Group) Open to Trading Cryptocurrency On Their Upcoming Platform Switzerland’s principal stock exchange, SIX Group, announced that they’re open to the possibility of trading cryptocurrency on their digital trading platform. Although
Coinbase Looking to Add 5 New Altcoins: Cardano, BAT, Zcash, 0x, and Stellar Coinbase announced today that will be exploring 5 new cryptocurrencies for its trading’s products including Basic Attention Token (BAT), Cardano (ADA), Zcash
New Study Shows 80% of ICOs Operated in 2017 Were Scams A recent study prepared by the Statis group ICO advisory firm identified that over 80% of ICO’s in 2017 were scams. The study examined
New York Approves New Power Rate Structure for Crypto Mining New York regulators just approved the new electricity rate for cryptocurrency miners that allow them to negotiate contracts as reported by Bloomberg on July 12.
Binance Invests in Plans of First Decentralized, Tokenized Bank in Malta Binance, the world’s second largest cryptocurrency exchange platform, is planning to create a blockchain based bank with token ownership according to Bloomberg on July
Robin Hood Cryptocurrency Trading Platform Adds Litecoin and Bitcoin Cash Robin Hood, the financial services mobile app, just added support for Litecoin (LTC) and Bitcoin Cash (BCH) on their cryptocurrency platform according to their blog
South Korean Officials To Develop New Cryptocurrency Exchange & Blockchain Regulations The Korea Times reported today that South Korean regulators are finalizing drafts of bills intended to develop a set of rules on cryptocurrencies, blockchain
Sirin Labs Plans to Release First Blockchain Smartphone in November Swiss smartphone developer, Sirin Labs, plans to release a blockchain based smartphone in November of this year, as reported on July 11. Sirin Labs raised
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