When is it better to buy a cryptocurrency? And when—to sell? These questions are far from idle. Whether you cover the trend completely and whether you will miss your profit at a decrease in the value of the asset depends entirely on properly chosen entry and exit points. To begin with, let us look at the simplest definitions of the entry and exit points based on the support and resistance lines.
We have already said that when building an uptrend line, we rely on two main points of price barriers and reinforce the trend of the third. This third point will be the best time to buy or enter the market. A similar situation is seen with a downward trend, only except for here, the third touch with the price line serves as an unequivocal signal to sell the asset or exit the market.
An effective moment of entering the market is also a price break through the resistance level when the momentum of the uptrend only begins to develop. To reduce risks, in such a situation it is advisable to enter the market through limit orders while paying special attention to correction zones.
It should be taken as a rule that a corrective decline rarely exceeds 38% of the last completed drop, and after that, the upward price is often observed. It is this area, bounded by the last vertex and a point of 38%, that is a good time to buy.
If there is a clear reversal trend and the market is falling, something the chart may display as a breakthrough of the support line, the asset should be sold with a minimum puncture above this line. It is not difficult to catch such a moment in the early stages of a downtrend.
Another strategy for entering the market is buying or selling on a countertrend. Often, the ascending countertrend fixes growth just behind the trend line, turning it from the resistance line into a support line. When the price touches this line, it is time to invest in the asset.
In the opposite situation, when the countertrend breaks the support line, turning it into a resistance line, and especially if the correction zones are nearby, the chance of a successful exit from the market increases.
These methods have proven themselves in a pronounced positive or negative trend, but there is a way to make money on corridors of relative stability. The lateral trend can bring profit to fans of short- and medium-term trade. To identify the optimal point of purchase or sale, conditionally divide the flat trend zone by a horizontal line in the middle. A rise in price above this line is a signal to buy; a drop below is for sale. This technique relies on the market’s tendency to grow or fall when crossing the border that divides it in half.
If you have already learned how to determine how a news agenda affects the value of a currency, you can try to enter the market based on the latest news. The subtlety here is that the market does not always react unambiguously to world events, and we know a number of examples when investors have sold their Bitcoins without waiting for rapid growth for just a few hours on negative crypto news from China. We will discuss the intricacies of trading on the news separately. For now, however, we recommend practicing on the described techniques. Share your success with us and follow the update of the “Analyze This” section.
Write: Richard Abermann