Trading analysis : support and resistance

By lugass | Cryptolugass | 28 Jan 2021


These 2 are basic but very important concepts that you must achieve in order to efficiently trade your precious BTC for Altcoins - as we can easily accept a portfolio value drop against USD, it is really hard to stay calm when you are losing against BTC.

They are used by traders to refer to certain price levels on charts that usually act as barriers, preventing the price from going too much upwards or downwards.They represent the most used techniques in technical analysis because they leave clues for future price behaviour from how the price reacted in the past76ba2ed0d108e3fec50507e760298c17fa718d2b9c32d4ce006f06c220ed7fdf.png

 

SUPPORT (surplus of buyers)

A support refers to the price levels where the downtrend is expected to stop due to the concentration of demand  created by buyers entering the market when the asset fell to a lower price

Breakdown= When a support line is broken downwards - wait for confirmation and sell the asset/close long positions/open short positions

Fake Breakdown = If the shadows (lines of the candle with no colored box) of the candlestick goes down the support level it doesn't necessarily means that the support is broken, maybe the market is only testing that level (confirmed if it end up closing above support level)

How to draw a support line?

You need to identify the support points (levels where the price bounced back many times ) by looking at the chart and draw a line connecting  at least 2 support points.

RESISTANCE (surplus of sellers)

A resistance, on the other hand, refers to the price levels where the uptrend is expected to stop because the asset is reaching price levels that have been rejected many times in the past - so that more and more traders start booking profits and we have a drop in the price.

A resistance point becomes weaker every times it get tested

Breakout = When the price breaks the resistance and trade above the line - wait for confirmation and buy the asset/open long positions/close short positions

Fake Breakout = If the shadows of the candlestick goes above the resistance level it doesn't necessarily means that the support is broken, maybe the market is only testing that level (confirmed if it end up closing above support level)

How to draw a Resistance Line?

You need to identify the resistance points (the highest point reached by price before it pulled back) and draw a line connecting  at least 2 of them.

 

 

Always wait for confirmation because you will often see a support or resistance level that appears broken, but the market was just testing it.

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lugass
lugass

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