When you encounter the term “Cryptocurrency Trading”, the first thing that comes to your mind will be “buy, hold and sell”. For some people, trading virtual currencies will be buying them first, holding until the price goes high to obtain the desired profit and then sell. But what if you buy at the wrong time when the price is at its peak?

The price of the cryptocurrency you invested in gradually crashes down to an all-time low. You incur a loss. With the lack of technical analysing skills, you would not know whether or when the price would rise up. Thus, making you sell at the worst price in the market ever. Such a bad experience in crypto trading will make you leave it forever.

We as supporters of crypto would not entertain this and hence help you learn some basic technical analysing skills for creating a position. For those who do not understand position, it is the quantity and price of a cryptocurrency you own or borrow to sell afterward.

Now, you have decided upon or chosen your preferable cryptocurrencies to buy. Next is deciding an entry point for creating a position. That means to decide when to buy. The technical analysis comes into picture now.

Instead of ranting the same old theory, we have the opinions of real cryptocurrency traders. As expressed in the survey conducted by Encrybit – an upcoming Cryptocurrency Exchange, the insights can help you a lot to learn.

The question to the traders was, “How do you create your Position for Specific Coins/Tokens?

 

The available options to answers were:

• Support/Resistance
• Trend Line
• News
• Chart Pattern
• Fundamentals

In response, almost half of the traders i.e. 46% selected all the given options. This stipulates that one single way or method isn’t sufficient. You need to combine one or more methods to get the best result out of technical analysis.

Let us understand the importance of each option.

Support/Resistance

 

The second highest majority i.e. 10% of the traders opted for this option. Support and resistance are two different levels or zones decided on the basis of price fluctuation. You can consider them as horizontal lines on the chart. For the newbies, resistance is the point from where price does not go higher (often referred to as ceiling). Support is the point from where price does not drop further (often referred to as floor).

We can also say that the price of a particular coin fluctuates between these two levels and can take them as boundaries. Therefore, when you intend to create a position, the support level helps you to set the entry position. Because you that the coin price is not going downward anymore and thus a good price to buy. Same way with selling, you check the resistance level and understand that the price is not going upwards anymore. Thus, a good price to sell the coin.

Trend Line

 

As the name suggests, it is a line on the chart, which depicts the price trend of the coin. 6% of the traders go with this option. Unlike support and resistance, it is not a horizontal line. It is a line with the slope to give an idea about the price trend of the coin.

You need to select the points and draw the trend line with the help of a line drawing tool available on the exchange. It is obvious that support and resistance levels are going to change over time and then the trend line comes in handy. It helps to determine whether the trend is bullish or bearish. There can be one or more trend lines based on the price fluctuations.

If you buy on the trend line, you are likely to gain profit and if the trend line bends, it is preferable to exit and start a new trade as per the changing trend.

News

 

News does not need an introduction. The share of traders choosing this option is the same as trend lines i.e. 6%. News like cryptocurrency banned in some country or regulated affects the price of the coin. In addition, any cryptocurrency getting lost or stolen also cause the price to go down. Thus, any adverse effect in the cryptocurrency world can cause changes in the price.

Based on the type of incident, the coin price can go higher or lower. So, it is a good practice to have acquaintance regarding latest happenings in the crypto industry.

Chart Pattern

 

5% of the traders go with the chart pattern option. It helps to recognize future price movements of a coin. There are two types of chart patterns

Reversals

• Head and Shoulders
• Double Tops and Bottoms

Continuations

• Cup and Handle
• Flags and Pennants

 

These are just a couple of chart pattern names to list out. There are many more than this. They are mostly named after the shape they frame on the chart in context with the price fluctuations. Each pattern has its own set of interpretation and requires patience and practice to master this art.

Fundamentals

 

It is nothing but knowing the fundamentals of the coin, like its purpose, application, etc. Moreover, the basic knowledge about cryptocurrency and blockchain. A trader should know the working to be sure about his/her next moves. Only 2% of the traders chose this option as it is not that reliable source to decide for a position.

Summary  

 

The traders’ opinion on creation of a position for a specific coin states that each factor/element is important instead of relying on only one. The best result is visible when these technical analysis tools are used in amalgamation. It will take time to learn to read charts and draw lines but once you are through, your trades will hardly go wrong.

So, good luck and happy trading!

 

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