Analyzing the action of cryptocurrency prices with tendency lines and candlestick diagrams
The prices of cryptocurrencies have been volatile in recent years, which has made it difficult for investors to make known decisions. An effective way to analyze the action of prices is by using the tendency lines and the candlestick diagrams. In this article, we will explore the use of these tools to identify the trends and models on cryptocurrency markets.
What are the tendency lines?
The trend lines are linear or curviline lines that connect the data points on a graph. These can be used to identify the direction of the price movement and to provide levels of support and resistance for trading decisions. There are two types of tendency lines: horizontal and vertical.
* Horizontal tendency lines: These lines are parallel to the price chart and indicate the long -term trend of the market.
* Vertical tendency lines: These lines converge at a certain moment, which indicates the short -term trend of the market.
How to identify the directions of trends with the candlestick diagrams
The candlestick graphs are another useful tool for identifying trends on cryptocurrency markets. Here’s how to use them:
- Identify Bullish or bear candles: Look for candles that are larger than their previous (bullish) or smaller than their previous tiny (bear).
- Identify the limits of the interval: Use the candlestick graph to identify the limits of the interval, which are areas where the prices have been traded between a certain price level and another.
- Search breaks: When a candle breaks above or under a border of resistance or support, it may indicate a change of trend.
How to identify trends with tendency lines
To effectively use the tendency lines, you must identify the correct direction of the market. Here’s how:
- Identify over -stated and outdated levels: Use horizontal tendency lines to identify over -purchase (price above an exceeding level) or exceed (price below an exceeding level).
- Identify the levels of support and resistance: Use lines of vertical trends to identify support and resistance levels, which are areas where prices tend to revoke.
- Search the reversals of trends: When a candle breaks through a tendency line in the opposite direction of the trend, it may indicate a reversal.
Example: Bitcoin price action
Let’s take a look at an example on how to analyze the action of prices using candlestick charts and lines:
| Date | Tall | Low | Close |
| — | — | — | — |
| 2021-01-01 | 23,500 USD | 22,800 USD | 23.200 USD |
| 2021-01-02 | $ 24,000 | 23,400 USD | 24.100 USD |
| 2021-01-03 | 25,300 USD | $ 24,900 26,200 USD |
In this example, the graph has a bullish tendency with a candle that is larger than its previous high (white candle). The horizontal tendency line converges to a resistance level of $ 26,000.
Using this data, you can identify the levels of assistance and resistance for your trading decisions. For example:
- If the price reaches the upper limit of the graph (black vertical line), it may indicate a potential purchase signal.
- If the price drops below the lower limit of the graph (red vertical line), it may indicate a potential for sale.
Conclusion
Analyzing the action of cryptocurrency prices using tendency lines and candlestick diagrams can help you identify trends and models, which makes it easier to make knowledgeable decisions. By understanding how to use these tools effectively, you can improve your chances of success in cryptocurrency markets.