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Trading101: A Beginner's Guide to Cryptocurrency Trading Strategies (Volume 1)

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2022-07-28
Trading101: A Beginner's Guide to Cryptocurrency Trading Strategies (Volume 1)

In this first chapter of the series Cryptocurrency Trading Strategies, we will cover the most important displays and tools used by technical analysts and crypto traders.

Understand the different displays tools

Trading View

The tool that is most used is TradingView. It is a tool that allows you to dissect the charts and make analyses from the most basic to the most advanced. It is a free tool. There is not only this one and we will come to that later in this article. Bitget traders can now begin trading perpetual futures through TradingView’s interface, you can find the guideline on how to set up your accounthere.

Once on TradingView, you can choose the market BTCUSDT PERPETUAL MIX CONTRACT of Bitget:

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You can then click on "Launch chart", you will arrive on this chart.

The linear display

This is a curve based on the price, quite simply. This display can already give us an indication of a trend.

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Display via candles

Depending on the unit of time (the "D" for "Daily" at the top left of the screen), you can choose what a candle represents:

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In our example, a candle represents 1 day.

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Note that it is possible to set this view to by selecting the minimum time, namely "1 second and that this view can go up to several months. This is a "1 to 1" view depending on the setting we have made.

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The first basic trading technique is to place "Supports" and "Resistances" on different time scales. Indeed, there is a need to calibrate and place these levels in different ways depending on the time scale because the candles will not have the same "Body".

The body of the candle measures the difference between the opening and closing price (or curren t price for the rightmost candle) of an asset. If the candle is green, the base of its body represents its opening price, and the top represents the closing price. (Source:IG.com)

To begin with, a daily view is sufficient. Concentrate at the beginning, on the minimum daily or weekly time scales, this will give you a background image that is much less complex than shorter time scales.

When a candle is green, it means that between the beginning and the end of the time unit represented by this candle, we closed the day above the price at which we opened the day. When a candle is red, it is the opposite, we closed the day below the opening price.

Above and below a candle, you can see wicks. The bottom wick is the lowest price that was hit during the day, and the top wick is the highest price that was hit during the day.

Regular trading hours for the U.S. stock market, including the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (Nasdaq), are 9:30 a.m. to 4 p.m., except stock market holidays. (All times Eastern unless otherwise indicated.) On early-closure days, typically right before or right after a market holiday, regular stock trading ends at 1 p.m.

Cryptocurrency markets are always open: they run 24 hours a day, 365 days a year. This is because, unlike stocks and commodities, the crypto market isn't a regulated exchange but is spread across a decentralized network of computers.

Cryptocurrencies are most commonly traded between 8am to 4pm in local time. While the crypto market is 24/7, your trades are more likely to be executed when there is the highest level of activity. Outside of these hours, when trading is lighter, it can be more difficult to open and close trades.

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The main advantage of candles is that they give more visibility than a simple curve.

By simply using a linear curve, we can have the impression that there has been no movement and that the point is at the same place of the day at the beginning or at the end except that if during the day the price has moved up or down, it can be important and interesting to know.

So we buy, this is not investment advice but common sense trading, not once we have stacked several green candles but rather when we have big red candles and retracements, obviously.

It is easier to notice trends in older markets such as gold or stocks that have years of history because we can look at the time scales of several decades. Cryptos, on the other hand, have little history, so it is more complex to trade in these markets. However, based on the history of supports and resistances, it is possible to detect which ones are stronger or weaker.

Support, Resistance Trends

Support, or a support level, refers to the price level that an asset does not fall below for a period of time. An asset's support level is created by buyers entering the market whenever the asset dips to a lower price.

Resistance, or a resistance level, is the price at which the price of an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price.

Uptrends and downtrends are hot topics among technical analysts and traders because they ensure that the underlying market conditions are working in favor of a trader's position rather than against it.

Trendlines are easily recognizable lines that traders draw on charts to connect a series of prices together.

The resulting line is then used to give the trader a good idea of the direction in which an investment's value might move. In this article, you'll discover how to use this tool. It won't be long before you're drawing them on your own charts to increase your chances of making a successful trade.

Should wicks be taken into account when defining support and resistance zones?

The wicks give a valuable indication of where the market has stopped during the period under analysis. Thus, it informs where the market has "said stop up" and "stop down". So obviously this information is very important. However, if a novice trader wants to have a little less noise, it is quite possible to analyze the charts without the wicks. However, it is a pity not to do so because we still have very important wicks, sometimes information that will give us the biggest piece of information necessary for good future choices.

Logarithmic vs Line ar Price Scales

Logarithmic price scale—also referred to as log—represents price spacing on the vertical or y-axis dependent on the percentage of change in the underlying asset's price. This is usually the default chart style.

Li near price scale—also referred to as arithmetic—represents price on the y-axis using equidistant spacing between the designated prices. Linear charts display absolute values.

The logarithmic, when we are on assets with a lot of volatility and a lot of up and down movements, will allow us to have something more "reasonable" once displayed on the screen because we will not have, for example, during a bull-run, a kind of disgusting and huge wick that looks like nothing.

Related article: A Beginner's Guide to Cryptocurrency Trading Strategies (Volume 2)

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