When it comes to cryptocurrency trading knowing how to use technical analysis is a must as it's the
most effective way for you to determine market trends.
I know many inexperienced crypto traders trade solely on news and rumors and they've ended up losing
money.
Why.
Because they trade based on other people's opinions or in other words they are gamblers.
So if you want to become a profitable trader you'll need to master some technical analysis techniques
before we go into how to make use of some technical indicators.
You must first understand support and resistance in very simple terms support and resistance are essentially
floors and ceilings in a market.
They are price areas that tend to act as barriers to support in resistance concepts are developed based
on a psychological basis.
As traders we continually rely on what happened in the past and technical analysis because we see that
the market patterns and interests repeat and repeat.
This is no more than a reflection of human nature and the analysis we make of relative values which
we tend to stick to until we're forced to make an adjustment by the actions of others.
In this case via the market
support is an area where traders found it attractive to buy previously or in other words it's the price
level where traders thought that the price was so low and they could make a profit if they placed a
long position and if it was attractive ones to buy in this area it may well be again.
On the other hand resistance is an area where traders found it attractive to sell previously if it was
attractive ones to sell in this area.
It may well be again.
So how can we trade support and resistance.
Will consider buying or going long when the price breaks up through the resistance level and we'll consider
selling or going short when the price breaks down through the support level and we'll keep holding when
the price is between the support and resistance levels
OK.
Here's a quick example so you can understand clearly how support and resistance work.
Now let's take a look at Bitcoins chart.
Can you quickly point out where the support level is and where the resistance level is as you can see
on the chart.
We have a support level at around six thousand dollars in November 2017 Bitcoins price surged from 6000
to over $19000 after hitting the new high.
Its price went back down to the six thousand dollar level and bounced back up again.
So we can easily know that is a support level at around six thousand dollars.
Similarly we have a resistance level at around nineteen thousand seven hundred dollars the price failed
to break up through this level and went back down to its previous lows.
We also have a resistance level at around eleven thousand seven hundred dollars the price attempted
to break up through this level many times but failed and went back down.
So after doing a quick support and resistance analysis you can instantly know it may not be a good time
to buy Bitcoin right now.
As you can see its price can possibly drop to the support level at around $6000.
So if you're looking to buy Bitcoin at this time you may want to wait until its price drops to $6000
and bounces back up or wait until its price breaks up through the resistance level at around eleven
thousand seven hundred dollars.
In the next lecture I'll talk about risk management and teach you how to protect your profits.