The trend is your friend – this rule is fundamental in technical analysis. This is why, before you start trading bitcoin, it is essential to know the direction of the trend of this cryptocurrency.
Another rule of technical analysis is that when you graphically analyze an asset, you always switch from a longer trend to a shorter trend.
There is a straightforward way to identify the trend using moving averages. Namely – one long-term and one short-term. When the short-term moving average is higher than the long-term moving average, it is assumed that the trend is up.
Analysts use different moving averages in their analysis. However, the most common is the 200-period and 50-period, pure, which gives the same weight to all periods and exponential, which provides more pressure to the more recent periods moving average.
Everyone can determine for themselves which type and time of averaging to use. However, he will give an example with 200-period and 50-period simple moving averages on the hourly BTC chart. If you are interested in bitcoin trading, visit bitcoin union’
Bitcoin Trading – Support and Resistance Levels
Support and resistance levels are another fundamental and useful technical analysis technique. They are used to determine entry or exit levels and can be very helpful when trading bitcoin through CFDs.
Put, support and resistance levels are the previous bottoms and peaks that the price tends to push off from. Support is the level at which the price of a currency pair usually slows down. And vice versa – resistance is the level at which it is possible to stop the growth of a currency pair.
These levels operate because of the tendency of investors to judge whether a financial instrument is expensive or inexpensive compared to previous highs and lows. To a large extent, these technical levels work precisely because everyone expects them to work.
What happens when an asset approaches its previous low?
Buyers get active and start buying actively. This is in conditions where sellers are not particularly eager to sell, waiting for evidence that the price will continue to decline, that is, in anticipation of a breakout in the support level.
And vice versa – when an asset approaches its maximum, sellers become active, and buyers take a wait and see attitude. This brings it closer to the indicated resistance level.
Moving averages, especially long-term ones, are a useful tool for determining the trend, but not particularly good for determining the best time to enter a position. Again, support and resistance lines come to the rescue.
The traditional rule of thumb for trading support and resistance lines is that when they are broken, they become the opposite of what they were; that is, resistance becomes support and support becomes resistance. In the following chart, you can see what the support and resistance levels look like.
Bitcoin Trading – Candlesticks
It is impossible to start talking about technical analysis and not mention charts. There are many different types of them – line charts, bar charts, candlestick charts, and so on.
The reason Japanese candlesticks are so attractive is the visualization of the chart, which gives insight into market behaviour and key turning points. This feature of the indicator makes it the preferred tool for technical analysts.
You can use other candlesticks in any market and at any time as long as you have an open price, a close estimate, a minimum and a minimum.
Bitcoin Trading – Technical Indicators
Finally, it is impossible to conduct technical analysis without using at least one technical indicator. And while there are dozens of indicators available to investors including over 60 new indicators in the MT4 Supreme Edition plugin, it is up to each trader to determine for themselves which indicator best suits their trading style.
Also, it should be born in mind that experts recommend not overflowing charts with indicators and not relying on more than two or three indicators when making a decision considering that some indicators may conflict with each other. Now let’s take a look at some of the leading technical indicators that traders and investors prefer.
It measures the momentum of the price movement, but can also help determine the direction of the trend.
