Surely you have heard the expression “To the Moon” referring to the price of a crypto taking off and rising sharply. These events can be anticipated in the trading of cryptocurrencies when you know in which moments you are, if in the middle of a trend or in its final phase. To know this, you must understand how the price moves and what its structure is.
First, we must understand that the price is cyclical and will always repeat movement from past events. This is how the most common trader’s saying “the price has memory” is born.
That’s why it’s important to know what a trend is and how to identify it.
A trend in the financial markets is defined as the movement or sustained direction of the price that is predominant in a certain time interval. Such movements carry in their structure impulses and reversals.
Based on this concept, it will be much easier to interpret it in a chart and give more precision to your technical analysis.
As its name indicates, the price action is ascending, since in its structure we will see higher and higher impulses, with shorter setbacks. That is, it performs higher highs and higher lows. The way a trader usually interprets and applies when positioning a trade is to look for buy in the short retracements that the price makes.
Within an upward trend, we will find:
– An accumulation phase in its initial stage, since at this time there is speculation that the price may shoot up at any time.
– A phase of expansion, where we find the greatest FOMO (Fear of Missing Out) or bullish sentiment and are entering the market the vast majority of traders.
– A distribution phase, where the position is liquidated. That is to say, where you will find massive sales.
Unlike the previous concept, the price action that predominates a downward trend is clearly downward. On this occasion there is a loss of value in the financial asset or crypto asset.
It is difficult to know that you are in the middle of a downward trend and can be led to deception, as it may simply be a deep reversal.
However, you can identify it from its structure by noting in the charts where the price makes a stronger downward impulse and the price goes back. This will mark a lower and lower high and as the phrase “lower and lower highs” says.
Like the uptrend, the downtrend has the same 3 phases as its starting point is the distribution phase, followed by the expansion, and finally back to the accumulation and start a new cycle.
It represents a challenge for a trader to trade in bearish trends and very few dominate it. Since this phase we look for sales in the reversals that the price makes, it is required a high knowledge or have an accompaniment to make good profits in downward trends.
You can consider yourself a good trader if you start to dominate and trade the market with a good percentage of success in this market trend.
We invite all crypto currency traders to self-educate and leverage themselves with all the information that Bitnovo offers,
Little by little, from this trading section we will try to improve your skills so that you acquire a deep knowledge about trading strategies.
This way, you will be able to have all the necessary tools at the moment of trading and understand when to buy crypto currencies and when to sell them.
Remember the importance of having clear concepts and follow us through this medium where we will share with you basic trading concepts that will provide a grain of sand for your trading career.