Crypto Academy / Season 3 / Week 3 - Homework Post for Professor @lenonmc21 | Trends, Trend Lines and Chart Patterns | by @jollybake
Introduction
For a trader to make a turning point in cryptocurrency trading ie always gaining or profiting, he or she must have a certain degree of knowledge on charts
These charts patterns houses trends that shows a trader when to buy and when not to, in order to make profit in Cryptocurrency market trading.
A chart is a representation of price over time, it can be candlestick, bar chart or line chart.
Within these chart, a successive movement occurs which can be bullish or bearish and this movement over time is termed trend.
Define in your own words what is a "Trend" and trend lines and what is their role in charts?
The steady movement of price in a particular direction over time say 1 hour, 1 week, 1 month is called TREND
These movements can be a long term movement, short-term movement, upward movement, downward movement or even side ways.
All these movements in price is better understood for effective trading and profit making.
Trend lines
Trend line is a line drawn on the price movement either upward or downwards connecting the significant lows and highs in the price movement.
what is their role in charts?
Trend line helps the trader to understand and determine the current direction of price and it often determines the specific direction on which the direction will change say from bullish to bearish or from bearish to bullish.
Explain how to draw an uptrend line and a downtrend line (Show a screenshot of each)
An uptrend is formed when the price in the market is moving in the higher high and higher low direction.
Therefore, in drawing an uptrend the lows are considered I.e we connect the major troughs in an upward movement of price showing a bullish movement of price.
A downtrend is formed when the market price makes a successive lower high and lower low.
So, we draw a downtrend by connecting the peaks of the price movement in a downward movement of price which shows a bearish movement of price
Define in your own words what "Supports and Resistances are and how we can identify both zones (Show a screenshot of each one).
Support
Support is a price movement level where a large number of buyers enters the market to stop the downtrending of price in the market thereby overpowering the number of sellers in the market.
For instance, in Nigeria right now there is a short supply of vegetables like onions, tomatoes, pepper, cabbage, carrots etc. Which make the prices of these goods to increase drastically. But supposedly there is a new supply of these vegetables in large quantities suppressing the initial supply then there will be a turnaround in price especially if the buyers remain constant.
Resistance
If the number of buyers overpowers the number of supply of vegetables in Nigeria it shows a resistance level.
It follows that resistance level is a point in price market where a relatively increase in price meets a turnaround point due an emergence of growing number of sellers who which to sell at a price different and lower than the current price of the market.
Resistance levels can be short-lived if new information comes to light that changes the overall market’s attitude toward the asset, or they can be long-lasting.
Explain in your own words at least 2 simple chart patterns with screenshots
Reversal chart patterns
A reversal in price pattern occurs when there is a change in the trend movement to a new price direction.
Continuation Patterns
Continuation patterns can be a bullish or bearish pattern, it occurs mid price chart and it continues to move in the same direction until the pattern is complete.
When a continuation pattern is formed after an uptrend, it means that the next continuation trend will be a downward trend.
Conclusion
As much as it is important for a Crypto currency trader to make profit in trading so it is important for a Crypto currency trader to understand the importance of trend line in chart because that is where his or her success in trading lies.