How To Trade Crypto: Support And Resistance

How To Trade Crypto: Support And Resistance

The most fundamental place to start when learning how to trade after you know what to trade and how much to trade is support and resistance. All charts reveal human behavior. All the the excitement turning to fear of loss and back to greed is all packaged into trading cycles. These cycles have tops called points of resistance and bottoms called points of support. These points of resistance and support can give traders a boundary or trading range where they can expect a coin to continue trading in. They also provide information about trends and opinions from the macro market sentiment. The larger the time frame, the more powerful the support or resistance. So for example, a monthly support will be much more powerful than a daily support.


When an established support or resistance is broken, meaning that a candle has closed on the other side of the line, there is a change in momentum that will establish new levels. Most often (greater than 50% of the time) a broken support will flip to resistance and a broken resistance will flip to support. This information can give us great entry and exit points as a trader. The support and resistance combinations in a trend will do one of three things: 1. they can miss entirely and create a gap, 2. they can meet perfectly and create a perfect handoff, or 3. they can slip and create a channel. Gaps create a wobbly unstructured chart which can easily collapse. Perfect handoffs provide powerful trends and can be traded and profited from. Slipping resistance and support will create channels that will still give us more confidence on the direction of a coin when one side is broken. Keep in mind that we must close outside of the channel to consider it broken.


When we combine the correct coin that has optimal coin supply inflation lower than our base currency with a 1% position size, we can pivot and enter trades with confidence in ways that preserve our capital and limit risk. When we add information from supports and resistances we now have entry and exit points. You now have enough foundation to be a successful crypto trader!

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