Steemit Crypto Academy | week 2 by professor @stream4u - How To Read Candlestick Charts In Different Time Frame & Information about Buy-Sell(Support & Resistance).

In trading, time is a very important resource and a lot keeps going on whereby the crypto prices keep changing in the crypto market every other time for example in 1 minute, 5, 15, 30, 45, 1 hour, week, month, and a year. It’s therefore important to understand and appreciate these various time frames before considering to trade.

You must choose the timeframe you are going to be relying on to place your trades, depending on the type of trader you are. The following are the different types of traders, so which one are you or you want to be?

These are short term traders who place trades in short time frames. They like taking advantage of the quick price movements make profits and close their trades immediately. However, these are oftentimes affected by the spikes in the market. When a spike happens it goes in their favour then they make tones of profits depending on the lot size used.

When I was starting out with trading I began with a scalping style of trading. There are plenty of scalping strategies that scalpers use in order to identify good buying and selling signals.

The maximum trading time frame for a scalper is usually 1 hour. Scalpers get their general trend of the market from the 1 hour time frame and then go down to as low as 5minutes to look for good trade entry positions.

These are also called Intra traders. They place and hold their trade positions for a day or a couple of days before they can close their trade positions in either profits or losses. They establish their major market trend based on the weekly time frame. The minimum time frame they can opt to look at is the 4 hourly timeframe as they design and keep track of their crypto trading analysis. Otherwise, Intra traders always keep their focus on the price action (Candlestick patterns) in the 4 hourly, Day and at maximum, the entire week.

These can also be termed as Swing traders. These place and hold their trade positions for a very long time. For example; they hold trades for weeks, months and years. They focus on the major yearly trend of the market and go as low as the weekly timeframe as they use the multi-timeframe technical trading analysis to analyze and predict the future market movements.

Reading Candlestick charts in the different timeframes

There are two major candles used in trading.

The bullish and the bearish candles

Let’s take a look at this Illustration

Designed by me using powerpoint

The Bullish and Bearish candle

In the image shown above, the bullish candle opened at $500, the bulls pumped the price to as high as $1200, the price was then rejected at that high and eventually closed at $1000. In trading, the closing price of a bullish candle is an opening price for the bearish candle. The price opened up at $1000, the bulls first tried to pump the price as high as $1700, unfortunately, the bears took over and dumped the price back down to as low as $150. The price was rejected at that lower price and eventually, the candle closed at $500.

Support and Resistance

In trading, there is a fundamental rule that is to do with support and resistance. “We buy at support and sell at resistance.” This should be your song always while dealing with the crypto trading arena. As a trader, when you approach any market, the first thing you need to establish on your trading chart is the support and Resistance zones because these guide you in identifying good entry points for the sell and Buy positions.

Let’s take a look at the BTC/USD trading pair on a weekly chart

screenshot is taken from my MT5 trading application.

In the illustration above, I used the exponential 200 days moving average to establish my support zone. I also plotted the resistance zone using a horizontal trendline. I have indicated the good buying points and Selling points in that market courtesy of the guidance of my own established support and resistance zones.

How to Interpret the market behaviour using the Candles in the different timeframes.

Here is a 4 hourly Chart for BTCUSD

screenshot is taken from my MT5 trading application.

Point A is a good buying point. Question, why is it so? The market is in a strong support zone. The second reason is that there is a bullish engulfing candlestick pattern formed in that circled area at point A, which signals us that the price is taking the upward direction.

The bulls indeed pushed the price as high as point C. At C, we have to jump out and collect our profits, we do not want the price to go back down and affect our profits negatively.

However, Point C is also a good entry selling position. Using the Resistance zone trading knowledge rule, you can realize that this is a good selling position so you enter your sell and scoop your profits as you see the market prices crushing back down to Point B. Those who had sold at point C, they have to jump out at point B. Point B is also another great buying position because of our support zone trading knowledge rule of buying at support, we opt to jump in with a buy and gain profits as the market makes its way up.

ETHUSD trading pair on an hourly Chart

screenshot is taken from my MT5 trading application.

Points A,B and C are good buying positions. Point B most especially, we see long wicks signifying to us strong price rejection of lower prices in that zone. Another reason can also be that this is a strong support zone and that’s why the price is just bouncing off that strong support line and it's so likely to head upwards.

D and F are our selling opportunities, using our trading analysis and tools, we can jump in with a sell and collect some good profits. Why? It’s at the resistance zone. The second reason, higher prices have been strongly rejected. The third reason is that an inverted hammer has been formed which is a good indicator and pointer to a selling decision.

Cc
@stream4u