How To Plot #Bitcoin Support and Resistance Levels Using Technical Analysis? A Dip Buying Guide...


March 27, 2018 · 504 views
How To Plot #Bitcoin Support and Resistance Levels Using Technical Analysis? A Dip Buying Guide...

Technical Analysis is not an easy subject to discuss with some traders specially the fundamental traders. They believe that Technical Analysis is just nonsense. But they are wrong.

Buying stocks, or in this case, cryptocurrency is all about making a profit. And they do this by buying low and selling high. This is why the price of cryptocurrency is so volatile. Almost every traders are trying to make a profit everyday. But to know when to buy takes some technical analysis.

How Is Bitcoin and Other Cryptocurrency Priced?

Before we continue, you need to know how cryptocurrency is priced. Cryptocurrency price is based on supply and demand. It's the number of traders willing to buy and sell a coin at a certain price. Therefore, traders are the one controlling the price.

You probably heard the term whales. They are the big money traders who can control the price by pumping million dollar worth of trades. These whales don't just buy coin blindly, they use technical analysis before they buy. And they sell once they hit their target price. 

How To Plot Cryptocurrency Support and Resistance Price Levels

You need a charting program to figure out the support and resistance levels. I use Tradingview.com to chart my cryptocurrency trades.

The main charting tool you can use to figure this out is the Fibonacci tool. Let's look at the daily chart below.

BTCUSD Fibonacci Levels on Daily Chart
BTCUSD Fibonacci Levels on Daily Chart

LTCUSD Fibonacci Levels on Daily Chart
LTCUSD Fibonacci Levels on Daily Chart

ETHUSD Fibonacci Levels on Daily Chart
ETHUSD Fibonacci Levels on Daily Chart

Let's look at the BTCUSD daily chart. Using the Fibonacci Retracement tool, you can plot the lines between the all-time high price of $19,800 and $3,500 from mid September of last year. These lines are 0, 0.236, 0.382, 0.618, 0.786, 1... and so on.

After you plot the Fibonacci Retracement, you will clearly see that the price of bitcoin bounce from those price lines. That is what you call the Support and Resistance price levels.

What happens here is that traders execute their trade based on the Fibonacci support and resistance price levels. When they see the price is about to hit the support price, they all start buying. Hence, the price of bitcoin goes up from that line.

The same thing happens when the price of bitcoin is about the hit the resistance line. Traders starts to sell. Hence, the price of bitcoin drops.

So as a trader, you should follow what other traders do. Otherwise, you are most likely to lose money. Imagine if you bought bitcoin at $19000 and you are still hodling.


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