Dozens of bullish and bearish live BTC USD Bitfinex candlestick chart patterns in a variety of time frames.
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- How to Read Cryptocurrency Charts for Successful Trading
- 16 Must-Know Candlestick Patterns for a Successful Trade | Bybit Learn
As you can see, at the overbought signal, the trend is reversed into bearish. Whereas on an oversold signal the trend goes back to bullish. RSI is one of the simplest indicators to use for:. Predicting tops and bottoms depending on overbought top and oversold bottom conditions. Confirming trend formations and avoiding fakeouts :. To confirm an uptrend, make sure the RSI is above To confirm a downtrend, make sure the RSI is below It calculates the average of a selected range of closing prices by the number of periods in that range.
For example, the day SMA takes the average price of the last 10 days and shows the results as a line on the graph. The SMA is a lagging indicator.
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The longer the period, the greater the lag. This is why the average price is lower than the actual price when comparing the trendline with the actual chart. You can use the SMA in relation to the price to determine a market trend. For example, if the price stays above a particular SMA for a prolonged period, the asset may be experiencing bullish conditions. Additionally, you can use SMA crosses to detect buy or sell signals. That said, there is one problem with Simple Moving Averages: they are susceptible to spikes.
When this happens, this can give us false signals. We might think that a new trend may be developing but in reality, nothing changed.
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To avoid this, you could combine it with an RSI indicator to confirm the buy or sell signal. Combining indicators helps you discover stronger signals, so consider doing so once you learn how to read cryptocurrency charts. Bollinger Bands BB are often used as a TA indicator to determine whether a coin is overvalued or undervalued.
How to Read Cryptocurrency Charts for Successful Trading
They can help traders visualize changes in volatility, determine if a cryptocurrency is over or undervalued, confirm divergences between prices and indicators, and project price targets. Bollinger Bands consist of two price channels bands surrounding one middle line. The middle line is an SMA set to a period of 20 days. The bands around it expand and contract following the price volatility of the asset.
As the price becomes more volatile, the bands expand. As volatility decreases, they contract. If the candles first touch the upper band, then the bottom band shortly after, this generates a SELL signal. If the candles first touch the lower band, then the top band shortly after, this generates a BUY signal. You can expect a rise in volatility when the bands are either too close or too far apart from each other. The Ichimoku Cloud is an indicator that is used to predict several things simultaneously.
Traders use this indicator to predict future areas of support and resistance , price momentum, and trend direction. The indicator consists of five lines:. The Base line , an average of 26 periods of the selected timeframe 26 days for a 1-day chart, 26 hours for a 1-hour chart, etc. The Convergence line , a 9-period average.
The Lagging Span , an average of closing prices, lagging 26 periods behind. If the price is above the cloud, the top lead line serves as the first support level while the bottom lead line serves as a second support level. If the price is below the cloud, the bottom lead line forms the first resistance level while the top lead line is the second resistance level. The Base Line - used to analyze price momentum:. If the price is above the red line, it usually indicates bullish market conditions.
If the price is below the red line, bearish market conditions could ensue. The Convergence Line - used as a market trend indicator:. If the blue line is volatile, it indicates that the market is trending. An upwards slope signals a bullish trend, while a downward slope signals a bearish trend. If it moves horizontally, it shows that the market is stagnating.
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The Lagging Span - used to spot potential trend reversals. If the green line crosses the price from the bottom-up, that would signify a trend reversal into bullish and a buy signal. If the green line crosses the price from the top-down, that would signify a trend reversal into bearish and a sell signal. Check out the following video to better understand this charting method:. Elliott Wave Theory is a TA method that looks for recurrent long-term price patterns related to persistent changes in investor sentiment and psychology. It is believed that upward and downward swings in price, caused by collective psychology, tend to show up in the same repetitive patterns.
16 Must-Know Candlestick Patterns for a Successful Trade | Bybit Learn
The theory identifies two types of waves:. Impulse waves - 5 waves numbered from 1 to 5 that set up a pattern. Corrective waves - 3 waves labeled a, b, and c, that oppose the larger trend. The theory also states that there can be smaller waves within the bigger trends. Like so:. However, the theory also states three unbreakable rules:. Wave 3 can never be the shortest impulse wave. Wave 2 can never go below the starting point of Wave 1.
Wave 4 can never reach the same price area as Wave 1. This indicator is best used for mid to long-term trades, as it needs a fair bit of price history to be relevant. Your goal will be to follow the waves and forecast the price action. Used in conjunction with trend indicators like RSI, you can try to predict the direction and peak of the next wave. There are also different strategies on trading breakouts with Elliot Waves. More details on that can be found here. Fibonacci retracement is an indicator that shows where possible support and resistance may occur and is represented by horizontal lines.
This method relies on the following theory - after the price moves in one direction, it will experience a partial retrace back to its previous price levels before resuming in the original direction. You can chart the Fibonacci retracement between any two high or low points that seem relevant to you. They are very popular among traders, and a large number watches the same levels.
As a result, the resistance and support levels become stronger, even self-fulfilling, due to collective market sentiment. One thing to keep in mind is that this indicator works best when used in a trending market. Then pick a high and low point on the chart and link them with the tool. You will see several horizontal levels numbered 0, 0.
These are based on a value known as the Golden Ratio. You will often notice that these levels correspond to previous price movements, where resistance and support were naturally found. A possible retracement to the Fib level 0.