If you've ever wanted to learn a bit about technical analysis but were intimiated by all the lines and fancy words some people like to use, you found the right article
Trends in Prices
In my humble opinion technical analysis is mainly about analyzing trends. Prices can go up, they can go down or they can go sideways. There are different way to trade and make money in all markets, though most investors prefer trending markets (though surprisingly not all experienced traders like trends).
What is a trend. Well a good classical definition is higher highs and higher lows for an uptrend or lower lows and lower highs in a down trend
Of course images on the internet or what someone shows you as advertising to join their trading group are never as clear cut as the images below. But the definition stands.
New Highs and Lows
If there is a an up trend in prices, the market should be making new highs. New highs are just prices that are above some old high level. Lots of traders call these 'breakouts' and like to trade them. We'll leave out specific trading strategies for now, but lets conclude that for an trend we need a series of higher highs and higher lows. Inasmuch we need to see new highs being made. If a market is trending it will make new highs periodically.
Know your time frame
This is one area I see lots of newbies making big time mistakes. If you are day trading, yes you need to look at 5min intervals or candles, but if you are investing for the next few years, please do not focus on the noise. Take a step back and look at the big picture. Look at a chart from the past 1 or 2 years please
Today's Example - Bitcoin
We can see from the current chart, very simple that prices are no longer making highs and we'd be hard pressed to say we are still in an uptrend. That doesnt mean we are in a down trend, bc prices are not making new "lower lows" its just means that for now, the trend up isnt very strong.
Dont over complicate things, keep it simple. Thats the long term view
Now of course if you are a trader, or want to invest in bitcoin, you could zoom in and in order to find some trade setups
The traders set up - 4h Chart
Again we have another down trend, however this time we see pretty clearly where the breaking point is, around 7600, so if prices go above that level, the downtrend, would be invalidated.
A brief word on drawing lines
Too many people get bogged down trying to draw the most perfect trend line. From this high to that one. Its not about bieng exact, its about understanding whats going on, especially when we are dealing with bitcoin and other crypto
If you liked today's post let me know and I'll be sure to share more, including topics on support and resistance, moving averages, price patterns and of course different market's like range boud trading and reversals. And also how to scan the crypto market to find new winners like Steem
