Seeing Clues In Charts - Everything You Need To Know About Technical Analysis
You can start reading or understanding charts without actually seeing them. In most cases, users and investors use Trading View to get the most out of their charting studies. And with charts, we mean technical analysis.
Author:James PierceReviewer:Camilo WoodDec 25, 2021289 Shares72.1K Views
Choosing a target is the first step in picking a cryptocurrency to trade on the cryptocurrency exchanges you've registered accounts with. To see the chart for a particular cryptocurrency, just click on the symbol in the Ticker or Instrument section on your trading screen. Then, you may study the current trends and any pertinent chart patterns that may be present.
This is how most charting works. You can start reading or understanding charts without actually seeing them. In most cases, users and investors use Trading View to get the most out of their charting studies. And with charts, we mean technical analysis.
If you want to learn more about technical analysis and charts, read more on this blog.
About Candlesticks
Munehisa Homma, a Japanese rice merchant and author of the first book on the psychology of markets, is often credited with inventing candlesticks in the 18th century. It wasn't until the last several decades that the rest of the globe rediscovered his concept and began employing candlesticks in charting. They provide a more complete picture of the market's fluctuations than straight lines.
Each day's closing price is shown as a dot on a line that connects all the dots on the daily line chart. There's a daily candlestick chart where each dot is replaced by an individual "candlestick," which depicts each day's high (the open), low (the close), and highest (the high) price (the close).
Patterns Within Patterns
The price begins to move in a lateral manner near the conclusion of the chart, which we refer to as a "basing" pattern. The selling pressure is fading, and individuals are buying and selling in equal amounts, keeping the price stable between the dotted lines of the graph.
The resistance line is on the top and the support line is on the bottom. It is a self-fulfilling prophesy for traders when the price reaches the support line and they start purchasing in the belief that the price will rebound off of the support line. It is also common for traders to sell in anticipation of an upcoming negative movement when the price is nearing the resistance line.
Since breaching a strong resistance line is generally followed by a big rise, the longer this base carries on, the more confident you may feel about the breakout. Basing lasts for the better part of a year in this example.
Chasing Breakout
is not advisable...
In the event that the breakout point is missed, what are your next steps? It's possible that you don't see the base pattern until it's already broken out. Maybe you're on vacation and only have half an eye on the markets. You may feel like you have no choice but to get on the bandwagon. It's a fresh rising trend, after all! Isn't there more money to be made?
You should avoid chasing breakouts. You may be thinking that as long as you don't sell your Bitcoins, you won't miss out on the Bitcoin boom that will ensue when the price eventually rebounds. The benefit of hindsight is undeniable. Unfortunately, you've violated rule number one, which is to take the money you've lost and go on--this is what we call "cut loss."
Keeping your finances in order includes avoiding false breakouts. Buy at the breakout point and place a stop-loss order to protect yourself from large losses in case of a steep drop in price below your stop-loss level. You may prevent yourself from losing money by placing a stop-loss order on a trading exchange.
Triangles Are Not Always Reliable
Charts are full of triangles. You'll start seeing them as soon as you start searching for them. If they don't have horizontal edges, they aren't very trustworthy as trading indications.
What About Wedges?
Pennants, sometimes known as wedges, are triangles with an upward or downward slope. Downward-facing wedges tend to break out higher than upward-facing ones. Most of the time, they are continuation patterns, which implies that they represent a brief response against the main trend.
Flags
Richard Schabacker coined the word "pennant." Also, he mentioned flags, a typical continuation pattern akin to the wedge/pennant, but with parallel lines. A rising trend is interrupted by periods of sideways movement, which may be upward or downward slanting. The breakout point from a flag, like a wedge/pennant, may present a favorable chance to leap into a continuing upward trend, especially if the flag's lines are horizontal instead of diagonal.
Head & Shoulders
Head-and-shoulders resemble the human head and shoulders. But it's beginning to sound as ridiculous as those individuals who believe the cloud outside their window looks like Elvis. Many realize that. But head-and-shoulders (H&S) is only a convenient shorthand for depicting a more complicated pattern. Based on considerable academic research, it's one of the most dependable patterns that may be used to increase trading profitability.
Volume Is Essential
In addition to price, volume is the most important metric. When looking at a daily chart, the volume is represented as a series of bars at the bottom of the chart, as indicated before. Volatility bars are often colored red or orange when prices have decreased and green or lighter if prices have increased.
There are several occasions when volume might be beneficial. As an example, breakouts are often followed by a substantial rise in trading volume after the market has been running sideways for a long period. However, if the volume does not rise, the breakout is likely to fail and be shown as a fake breakout.
Summary
Technical analysis is one of the best strategies to implement if you want to make money in stocks and crypto. Since crypto doesn't have fundamentals, you can always use technical analysis to back up your trade.
James Pierce
Author
Camilo Wood
Reviewer
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