Crypto Trading by Identifying Support and Resistance] - Steemit Crypto Academy | S6W3 | Homework Post for professor @shemul21
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1. What is the Support & Resistance zone?
While performing every trade order, traders must be able to discover both key resistance levels on a chart using technical indicators. Traders typically utilize these support and resistance zones to do historical research and then anticipate the future price of an item. They always accomplish this by tracing horizontal lines or tracing up and down trendlines on a chart. Traders may also use Fibonacci retracement to flag out these zones on a chart.
This key resistance region normally acts as a barrier, stopping asset prices from being pushed farther in a given direction, and this zone usually allows traders to seek for excellent trading chances at the exact regions in which an asset will have to flip.
What is Support Zone
The Support Zone is defined as the lower range of an asset price that acts as support since it has not previously been broken with an upper tier that acts as opposition. Because of the large concentration of demand in this zone, the support is projected to take a temporary break. In this case, the price of an asset frequently struggles to break and close underneath the ranges, resulting in a shift in its trend.
Throughout a resistance level, there is generally a lot of purchasing force (supply), which causes the marketplace to fight at that position by driving the asset's price higher.
What is Resistance Zone
The higher area of an asset values that acts as opposition just because it hasn't before been broken with a lower range that acts as supports is known to as a barrier zone. Because of the large content of supplies in this zone, the resistance is predicted to take a temporary break. In this case, the price of an asset frequently keeps breaking and close just above zones, resulting in a shift in its trend.
Throughout a resistance line, there is generally a lot of market volatility (supply), which causes the market to resist at that point by driving the stock's prices lower.
2. Explain different types of Support & resistance with proper demonstration
Vertical key resistance zones, slope degrees of help and opposition, and dynamical chart patterns are the three primary forms of support and resistance zones. I'll go through them in more depth below.
1. Horizontal Support and resistance
The cost of an investment is mainly created in a generic fashion so because cost everytime attempts to keep against every horizontal base besides energy consumptions until it starts to break lower (support) or did break greater (resistance) but when the cryptocurrency market overturns to a certain area, the preceding opposition will transform in to the recent support or recent support will transform into fresh opposition regardless of the direction whether upturn or slow decline and this dispensable of assistance and opposition is exceedingly very important. This region of support/resistance is always made up of either purchasers or venders.
During an upswing or a decline, horizontal supporting and opposition normally occur.
a. During Uptrend
When in an upswing motion, there is generally a pause above horizontal opposition, which has always suggests the possibility of a new fad resumption, and the tip with which the opposition was cracked would become the fresh assistance, and indeed the cost now moves upwards through establishing constant higher peaks and greater low points as the valuation turns from bullish to bearish.
The BTCUSD chart above shows that the BTCUSD is developing a continuous pattern of due to the advantage and greater lows, and we've seen how horizontal levels become new barriers as price movement shifts from bullish to bearish when the price breaks underneath the level.
b. During Downtrend
Throughout a bearish divergence motion, there's really generally a pause underneath the horizontal line, which still suggests the possibility of a new fad resumption, and the point at which the assistance was cracked will become the new opposition, and the cost now moves declining trend by trying to form constant actually supported and lesser lows even as price did turn from bull market to bearish.
We can see from the BTCUSD graph elsewhere that the BTCUSD is generating continuous actually supported and lesser low points, so we'll see how the horizontally barrier converts into new support as market action shifts from bearish to positive when the price breaks above the barrier.
2. Sloping levels of Support and resistance a
Sloping levels of resistance and support are common in an advance or a decline.
a. During Uptrend
Since there is a breach at the greater parental high that does not break the prior levels but establishes a consistent new higher high, sloping levels of resistance and supports frequently appear diagonally throughout an upswing. This still happens vertically. This means that throughout a bull market, at least two continuous higher highs must be connected diagonally, resulting in higher in asset bubble.
You could see from the BTCUSD chart above that whenever a level was refused, the value of BTCUSD steadily increased by drawing back and resuming its ascent.
b. During Downtrend
During a downturn, sloped level of resilience and supports frequently arise vertically whenever there is a break just at focus shifts low that does not break the prior thresholds but establishes a persistent special low low. This still happens diagonally. This means that during a negative trend, at least two continuous lower lows must be linked diagonally, resulting in a fall in asset price.
We could see from the BTCUSD graph above that BTCUSD price resumed its negative journey whenever a barrier was passed by drawing back and maintaining its gradual decline.
3. Dynamic Support and Resistance
Moving average indicators can readily detect dynamic support and resistance levels, and it is generally a retracement that occurs in the market when the market makes a fresh draw back by opposing that region and continuing to move in its initial direction. This dynamic support and resistance happens most often during an upswing or a decline. I'll demonstrate this with the use of a Rolling Average.
a. During Uptrend
So when price drops just above bars of both the signal and gets pushed back down to resume this upward rise during an uptrend, the dynamically trend line is evident first from MA.
We can see from the BTCUSD chart above that the MV indication was serving as a dynamic support as the BTCUSD price moved upward. We can also observe how the BTCUSD price was rejected at the support point in the MV line, forcing it to retrace then retreat before continuing to move upwards by establishing fresh growth has brought and lower lows.
b. During Downtrend
Because when price drops underneath the bars of a signal and gets pushed back back and started its downward trajectory during a downtrend, the dynamic resistance level is observed from the MA.
We could see from the BTCUSD chart elsewhere that the MV signal was serving as a fluid barrier as the BTCUSD price moved downwards. We can also observe how the BTCUSD price was rejected at the strategic change process in the MV line, causing it to retrace, retreat, and continue moving downhill by establishing new actually supported and lower lows.
3. Identify The False & Successful Breakouts. (demonstrate with screenshots)
Traders should constantly keep an eye out for marketplace breakthroughs since the market can sometimes signify a real or false breakout. This type of breakout generally occurs when an asset's price closes from above or below the resistance or support zones. In the following sections, I will describe both erroneous and effective stock breaks.
a. True Or Successful Breakout
It is a type of breakthrough that happens whenever a price moves from underneath (support) attaining (opposition) whether by trying to continue in its original direction or adjusting its initial direction to a new direction (reversal). There are two main types of outbreaks: progression of breakouts and reversal of breakouts.
a1. Continue Breakout
When the price of an asset advances significantly in one direction, it will retest and make a retreat by breaching that level (either support or resistance), then continue to follow the same path.
We can observe a continuing breakthrough in the BTCUSD graph image, even as value of BTCUSD has to breach the horizontal supports from under, then retest and keep heading in the same direction.
a2. Reversal Breakout
The term "reversal" implies a successful shift in market line, either from bullish to bearish or straight ones, since a new trend direction is generally formed after a successful breakthrough. For example, the price of BTCUSD may be trading upward, then retake at a level of breakthrough, then turn upsidedown by moving downtrend and making new distantly and lower lows.
The BTCUSD chart above shows a shift in pricing successful compliance a breakthrough, as the price of BTCUSD has to break horizontal supports from underneath, then retest and begin moving in the other direction.
False Breakout
This generally occurs when price moves beyond a breakout, either from above (resistance) or below (support), and then reverses its motion by heading back into the key resistance areas.
The BTCUSD chart above shows a negative continuation since the price has to break under a support line, resulting in a fakeout of bearish motion from underneath.
4. Use Volume and RSI Indicator Combined with Breakouts & Identify the Entry Point. (demonstrate with screenshots)
Using such a quantity and RSI predictor in conjunction with a breakthrough in order to determine both entrances and exits points has proven to be very effective because the RSI criterion invariably demonstrates flawless locations for either overvalued or oversupplied areas in a graph whereas the quantity emphasizes the stability existence of assets cost price and quantity. So, using a chart as an example, I'll explain it below.
In other to carry out this trading strategies:-
By scaling out their chart for better visibility, traders ought to be able to detect both supporting and resistance levels.
After that, the volumes meter would be able to display the stock's market and economic balance.
The RSI indicator can determine if the marketplace is overvalued or oversold.
The quantity breakthrough should be bigger, allowing for tremendous momentum, causing the asset price to move in the desired direction.
Traders can place a buy order immediately after a breakthrough spike finishes just above horizontal barrier, with a take-profit at the next high point and a stoploss underneath the new position.
Traders can place a sell order immediately after a breakthrough candlestick closes from below the horizontal support, with a takeprofit at the next record low as well as a stoploss above the new position.
The BTCUSD chart above shows how the BTCUSD value was traded in the overvalued zone, indicating a high likelihood of price reversal at a support breakout since the volume indicator indicated that there was a lot of selling pressure in the market, pushing the price deeper downhill.
5. Take a Real Trade(crypto pair) on Your Account After a Successful Breakout. (transaction screenshot required)
In this portion, I will use my knowledge from my lecturers' lectures to make a solid technical analysis using tradingview.com, and then I will execute my long order in my verified Binance account.
According to the chart above, the market was originally on a positive trend before being REJECTED and, after a time, there was a PULLBACK on the RESISTANCE zone, ushering in another period of negative market.
Using my technical indicators, I can validate the signals and determine the best time to enter a trade.
The RSI indicator below shows that the price quickly went DOWN and persisted in that direction, suggesting a strong negative trend, while the volume indicator suggests that there is increased trading velocity and price fluctuations at this level.
6. Explain the Limitations of Support & Resistance (false breakout).
Due to the increased or low volatility of the stock market at times, traders are unable to determine if a breakout is true or false at the support or resistance levels, but once a trader figures out this breakout, he will be highly successful in his trade.
For example, if an asset price achieves a breakout at a support level, the candle may lose strength by closing above the support level, causing traders to get misleading breakthrough signals.
The BTCUSD chart above shows how the BTCUSD price relocated towards a column base and broke below it, but had to close above it, indicating that there is strong buying pressure at the support point, forcing the cost to keep moving uptrend, which could result in significant losses if a trade is placed at that breakout position. But, in general, no trading method is ever 100 percent correct, thus traders should constantly mix various strategies in order to properly forecast market movement.
Conclusion
So far, I've been able to grasp the concept of support and resistance, as well as the numerous sorts of support and resistance. I was also able to distinguish between a fake and actual breakthrough. I was able to properly use the volume and RSI indicators in conjunction with a breakout to find market entrance and exit positions.
In the practical section, I was able to utilize two EMAs (50 and 21 EMA) to anticipate the direction of the EOSUSDT price, and I successfully executed a buy long order that went according to my prediction, resulting in a $0.11 profit.
Thank you so much, Professor @shemul21, for your fascinating and lovely lectures, as I have learned a lot about cryptocurrency trading by finding key resistance areas.
CC
@shemul21
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