How to identify trends using the analysis of price action in cryptocurrency

In the cryptocurrency world, trends are a crucial aspect of investment. With many new parts entering the market every day, it can be difficult to separate the signal from the noise. However, an effective way to identify trends is by analyzing price action. In this article, we will explore how to use the analysis of price action in trading of cryptocurrencies to identify trends and make informed investment decisions.

What is the analysis of price action?

Price action refers to the visual representation of the price movement of a currency, including its ups, its stockings, its open, its closure and its volume. It is a crucial tool for merchants to analyze the market and predict future price movements. The analysis of price action breaks down data into smaller units, highlighting key models and trends that can be used to identify potential purchase or sale signals.

How to use price price analysis in cryptocurrency trading

To identify trends using price action analysis, follow these steps:

  • Open a trading platform : Choose a reliable cryptocurrency trading platform, such as Binance, Coinbase or Kraken, to start analyzing prices.

  • Create a graph

    How to Spot Trends

    : Open the trading platform mapping interface and create a new graph with a specific time (for example, 4 hours, 1 day).

  • Identify the models

    : Look for models in price action, such as:

* Bollinger Bands (BB): a combination of two mobile averages, where one is wider than the other.

* Mobile medium (MA): two or more lines which converge to form a single line.

* Relative force index (RSI): a measure of market volatility.

  • Analyze the directionality : Study the direction of the price movement:

* Thalsh: prices go upwards, indicating a potential upward trend.

* Lowering: prices decrease downwards, indicating a potential decrease trend.

  • Look for surfing / occurrence conditions : Identify when prices are exaggerated or occurred using indicators such as RSI and Bollinger groups:

* Excessive conditions: prices are greater than 80, which indicates the overvaluation.

* Surveillance conditions: prices are less than 20, indicating the undervaluation.

How to use the indicators

Incorporate the following indicators in your price action analysis:

  • Relative resistance index (RSI) : Measures market volatility and identifies when it is excessive or occurring.

  • Bollinger bands: a combination of two mobile averages, where one is wider than the other, indicating potential trends.

  • Divergence of the Mobile Average Convergence (MacD) : identifies changes in movement quantity, as a bullish signal.

Example

Suppose we want to analyze the cryptocurrency market for Bitcoin (BTC). We open the graphic of our trading platform and identify the following price action models:

  • A recent trend with a bollinger strip of 20 units above its central line.

  • RSI reading of 30, indicating excessive conditions.

  • MacD reports on both sides, showing potential purchase and sale signals.

Based on this analysis, we decide to enter a long position (buy) when the price breaks below the lower Bollinger strip, which occurs at 3:45 pm UTC. If RSI reading continues to be excessive, we should consider selling the long position before it reverses its trend.

Conclusion

Analysis of price action is an effective tool for identifying the trading trends in cryptocurrencies. By studying price models and analyzing directionality, indicators and other visual representations of market data, you can identify potential purchase or sale signals. Do not forget to always be cautious and define stop-loss orders to protect your investment.

By incorporating this approach into your trading strategy, you will be better equipped to sail in the complex world of cryptocurrency trends and make informed decisions where to invest.

ROLE CRYPTOCURRENCY TRANSACTIONS