Steemit Crypto Academy Season 3 || Dynamic Course for Beginners - Week 3 || All about Trends, Supports and Resistances and simple chart patterns || by @ahsanjawed
All About Trends
✧ What are Trends and how are they formed?
A trend is the price movement of a market or an asset in its overall direction. Trendlines or price action in technical analysis emphasize when the price is making higher swing highs and lower swing lows for an uptrend, or lower swing lows and lower swing highs for a downtrend.
Contrarians look for reversals or trade against the trend, while many traders trade in the same direction as the trend. All markets, including stocks, bonds, and futures, have uptrends and downtrends. In statistics, trends can be seen when monthly economic data grows or lowers from month to month.
Traders can spot a trend using technical analysis techniques such as trendlines, price action, and technical indicators. Trendlines, for example, may depict the direction of a trend, whereas the relative strength index (RSI) is intended to depict the strength of a trend at any particular period.
A range or trendless period is characterized by the absence of a trend—that is, a period in which there is minimal overall upward or downward movement.
A rising trendline is seen in the chart below, as well as an RSI value that indicates a strong trend. Although the price fluctuates, the overall trend is upward.
✧ What are trend lines?
Trendlines are immediately visible lines drawn on charts by traders to connect a sequence of prices or to illustrate the best fit of data. The resulting line is then utilized to provide the trader a solid sense of which way an investment's value might move in the future.
A trendline is a line drawn over or under pivot highs or lows to represent the current price direction. In every time frame, trendlines offer a visual representation of support and resistance. They depict price direction and speed, as well as patterns during moments of price contraction.
- Trendlines use a single line or curve to show the best fit of some data.
- A single trendline can be drawn on a chart to help you see the trend more clearly.
- Trendlines can be used to build a channel by applying them to the highs and lows.
- From trader to trader, the period evaluated and the exact points used to form a trendline differ.
The use of trendlines is relatively simple. A trader merely needs to use open, close, high, and low to chart the price data. A candlestick chart of the Russell 2000 with the trendline applied to three-session lows over two months is shown below.
✧ Consider the following example of a trend line constructed during an uptrend
✧ Consider the following example of a trend line constructed during an downtrend
✧ What are supports and resistances and how can we find these areas on the chart?
Price zones on a chart that is likely to draw the most buying or selling activity are known as support and resistance (S&R). The support price is the point at which more buyers are expected than sellers. Similarly, the resistance price is the point where more sellers are predicted than buyers.
Many technical analysis approaches are intended to identify important support and resistance levels where the market may retrace. Horizontal lines, trendlines, channels, chart patterns, and Fibonacci tools are just a few of the tools at your disposal. The breaking of support and resistance levels has produced a comprehensive trading technique that is widely used by regular Forex traders.
✧ Types of Support and Resistance Lines
In the market, there are many different sorts of support and resistance lines. They are distinguished by how they form. The following is a list of the most critical levels that every trader should be aware of.
|Horizontal S&R Levels:||Using at least one price point, horizontal lines are used to draw S&R levels.|
|Round-Number S&R Levels:||Around round exchange rates, psychological S&R levels are at an all-time high (e.g. 1.00, 1.10, 1.50 etc.)|
|Trendline S&R Levels:||Drawn using at least two price points and upward or downward sloping trendlines.|
|Fibonacci S&R Levels||This levels are based on Fibonacci ratios and are used to determine when a market correction has ended.|
|Dynamic S&R Levels:||In this With each new price tick, S&R levels are updated.|
✧Horizontal Support and Resistance Levels
✧ Round-Number Support and Resistance Levels
✧What are simple chart patterns and how can we identify them?
✧ simple chart patterns
- A chart pattern is a graphical representation of price movement that uses a succession of trend lines or curves to represent price movement.
- Chart patterns are natural phenomena characterized by price swings in a financial asset produced by a variety of variables, including human activity.
- Technical analysis is built on the foundation of chart patterns.
- Chart patterns are employed in technical analysis to identify trends in the price movement of an asset.
- A trader who has the knowledge and expertise to detect patterns and use them in their decision-making process has a better chance of predicting where the price will move next.
Two trend lines begin to meet in symmetrical triangles, signaling a breakout in either direction. The resistance line is drawn with a downward trend, while the support line is drawn with an upward trend. Even though the breakout can occur in any direction, it usually follows the market's general trend.
A wedge pattern is characterized by a tightening price movement between the support and resistance lines; it can be a rising or falling wedge. The wedge, unlike the triangle, does not have a horizontal trend line and is made up of either two upward or two downward trend lines.
✧Head and shoulders
The head and shoulders pattern attempts to anticipate a market shift from bull to bear. All three levels collapse back to the same support level, which is marked by a big peak with two smaller peaks on either side. After then, the trend is expected to break down in a negative direction.
Technical analysis relies heavily on trends, trend lines, and chart patterns. No trader can effectively conduct an analysis without these tools.
As newcomers, it's important that we learn the basics and use them to our advantage.