Basics of Technical Analysis of Crypto Price Action
If you want to trade cryptos successfully you must have at least a basic understanding of how to analyse price action on a chart. As you need to figure out in advance at which price to enter a trade and where your target will be, you need tools which help to find those price levels.
Layers of Resistance And Support
Another important measurement within those market cycles and waves are levels of resistance and support. You should look for levels within the chart, where former price resistance turns into a support level.
When a price had first touches a certain price range from below and later in the chart touches that level from above, you know that that former resistance is now support. So, it is likely that the price wants to climb towards higher levels.
When you analyze the chart on different time frames, you’ll see how resistance and support levels play together. You’ll often find the waves of smaller time frames playing perfectly within the levels of higher time frames.
Finding resistance and support levels should be used together with other TA tools. That’s what you’ll always want to do – use tools and indicators in combination.
Besides recognizing waves, Fibonacci retracement levels and recurring resistance and support areas, along with trend lines are another important tool which should be drawn into the chart.
The trend is your friend, till the end when it bends.
Trend lines should be again marked on different time frames. Often, they are very obvious. But you can use a trend line tool and play with it, to maybe find more trendlines that haven’t been that eye catching at first glance.
Trendlines are important measurements, which let you know that a bullish or bearish trend is still intact. As long as a price doesn’t break out above or below the line, traders can ride the trend and not exit before it ends.
When the price breaks out of the trendline, it’s a signal for a likely trend reversal. At such points traders exit the trade and/or enter new trades for the other direction.