Understand the prices of cryptocurrencies by analyzing the action of prices with trend lines and indicators
Cryptocurrencies have drawn special attention in recent years, especially among merchants and investors who are looking for ways to take advantage of the rapidly evolving market. One of the most effective tools used by traders is to analyze prices’ action, which consists in identifying models in the price movement of cryptocurrency through various technical indicators. In this article, we will immerse ourselves on how to use trend lines and indicators to analyze the prices of cryptocurrencies.
What are the trend lines?
The trend lines are graphic representations that connect a series of purchasing or sale points on a graph. They help identify the management of the price action over time by providing a clear image of the place where cryptocurrency is probably going in the future. There are several types of trend lines, including:
* Simple mobile average (SMA) : the shortest mobile average of the cryptocurrency fence prices.
* Exponential mobile average (EMA) : EMA is used to smooth volatility and identify trend changes.
* Relative force index (RSI) : an indicator of Momentum which measures the strength of the recent price movements of an asset.
What are the indicators?
The indicators are calculated values derived from various models of graphics or market data. They provide valuable information on the direction, strength and volatility of cryptocurrency. Some popular indicators include:
* Mobile average
: the average prices of a warranty over a specified period.
* Bollinger strips : the combination of a mobile average and a standard deviation indicator which provides an idea of the price movement on a bull or bear market.
* Stochastic oscillator : a momentum indicator which measures the relationship between the price of a title and its price compared to its previous price.
Use of trend lines and indicators for the analysis of cryptocurrencies
When combining trend lines and indicators, traders can better understand the prices of cryptocurrencies. Here are some tips on how to analyze price action using trend lines and indicators:
- Identify the trend : Look for signs that indicate the direction of the price movement, such as a bull or lowering spark plug.
- Analyze the price action : Use models of graphics such as triangles, corners and heads to identify the potential levels of support and resistance.
- Use indicators to confirm the trends : Use indicators such as RSI and Bollinger bands to confirm whether an ascending trend is real or simply a false movement.
- Search for inversion models : Identify the reversal models using trend lines, such as the Ichimoku Cloud Cloud line crossing prices.
- Use trend lines to define input / output points : Use trend lines to define input and output points according to the price action.
popular cryptocurrency trading strategies
Here are some popular trading strategies that use trend lines and indicators:
- Day Trading : Identify trends, using indicators like RSI to confirm transactions.
- Swing Trading : Use of short -term trends with long -term support and resistance levels.
- Long / short positions : Identify the inversions on the market and take long or short positions depending on the trend lines.
Conclusion
The analysis of price action through trend lines and indicators is a powerful tool for merchants and investors who seek to take advantage of the cryptocurrency market. By combining these two techniques, traders can better understand the management of the market and make informed commercial decisions. Do not forget to always be cautious and do your own research before entering the trades.
Additional resources
- Books:
“Technical analysis of financial markets” by John J.
