There are a lot of people who have difficulty reading charts (TA) or think it is “not real” and I too held that opinion when I began. This article would be intro cum guide to Crypto Technical Analysis. The reason for this is the massive amount of misinformation spread.
Also read: Why Polygon (Matic) is the most underrated cryptocurrency, and how to get started with it
Candlesticks are representations of money flow, while what you are charting is essentially human psychology. Human behavior follows patterns time and time again, how many times have you been online and found an ad that is exactly what you were looking for?
The aim of trading isn’t to always be right, but to stack the odds in your favor. Many of the videos on YouTube, etc. become very complicated because the people making them spend more time showing off their knowledge than teaching.
I’ve tried my best to simplify trading here
With a simple understanding of the following things, you can trade very successfully:
- Candlesticks
- Trendlines
- Patterns
- Support and Resistance levels
- FIBS
- Volume
- Moving averages
- Where to place your stops
If you can fully understand these concepts, then all you need is discipline and risk management and you WILL make money trading
Here’s how Crypto Technical Analysis works
- Entries and exits (targets
- Support and Resistance levels
- FIBS
- Moving Averages
- Patterns
You can use these levels to determine where to enter and exit your trades in the market.
The next step is to figure out which direction the market is going. This is where Candlesticks Volume and Patterns come into play.
Candlesticks
If you see candlesticks coming into the market, that tells you that pressure on that side of the market is slowing down.
Slow momentum approaches an important level when there is uncertainty in the market and there is a good chance you will see a turn very soon.
An entry signal can be provided by a small bodied candle at an important level.
Volume
You can see where the big boys are positioning themselves
In CCT, I posted that we had the highest volume spike on ETH to date and filled my bags at $120 as a result
It’s all about positioning when you have big volumes. They have a vested interest in protecting that level once the big bulls are in. Following the big money is the easiest way to trade.
There’s a good chance we’re going to see the biggest volume candle we’ve ever seen on Bitcoin when the bear market begins, this tells us the big boys are getting out, and it’s probably a good idea to follow suit.
Patterns
Patterns are literally the easiest way to trade; if you only trade patterns, you can be a successful trader
Every pattern trader could see this incoming bull run because there are inverse head and shoulders and cup and handle patterns on the daily chart across the board.
Patterns have measured targets that are essentially self-fulfilling prophecies. When you see these targets align with FIBS and support/resistance levels, you get what is known as confluence and you know where the market is likely to go.
An inverse H&S pattern can be measured by taking the distance from the head to the neckline, and then measuring that same distance out of the pattern. All patterns thus have predetermined targets
Support and Resistance levels
These are just levels in the market where there is a lot of liquidity (lots of buy/sell orders), and they hold so well because a lot of money is positioned there, so it takes a lot of money to push through these levels .As soon as a support level is broken, it becomes a resistance, and vice versa
Once one of these levels gets broken, the market usually RETESTS that level to ensure that it has indeed changed from a support to a resistance.
THIS is where you want to enter a trade
A support is a good place to buy, and a resistance is a good place to sell .Years later, the market still remembers these levels. You can measure the strength of a level by looking at how the market reacted when it hit it a few months ago
There’s a good chance you’ll get a turn if you notice slowed momentum coming into these levels (candlesticks and declining volume).
FIBS
FIBS are the mathematical language of the universe
They gave people two value neutral decisions to choose from (two white T-shirts) and while you’d think the results would be split 50/50, the scientists found the collective human decision making ratio to be 61.8% (or .618 fibonacci).
Therefore, your .618 is the highest probability target and the best retracement FIB to enter a trade
Retracement fibs are run by simply finding where the money flow starts and running them from the bottom to the top, which will give you your entries.
- 38.2% retracement of the move
- 50% retracement of the move
- 61.8% retracement of the move
- 78.6% retracement of the move
By entering at 618, you also stack the odds in your favor, since you risk only 40.2% if the market goes below the move, and you stand to gain 61.8% if they simply retest the highs.
FIB Extensions
You can now set your targets, with the highest probability being 61.8%
It seems that they’ve been running to the .618 and the 1.618 and then the 2.618 in this bull market.
In this case, I scale out 50% of my profit at the .618 and set my stop loss to break even, then scale out another 25% at the 1.618 and let the rest ride.
FIBS should be extended from the bottom to the top of a leg of money, and then retraced back to where it started.
This will give you a target.
If you use FIBS in conjunction with Patterns and Support/Resistance, you can get a good idea of where the market will go
