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How to identify the trends using the analysis of the price action in cryptocurrency

The world of cryptocurrencies has witnessed a significant increase in popularity in the last decade, with many investors gathering to negotiate and speculate on the market. However, the identification of trends in the cryptocurrency space can be a challenge due to the complex and constant nature of these markets. In this article, we will deepen the way in which the analysis of prices can help traders and investors identify cryptocurrency trends.

What is price analysis?

Price Action Analysis (Paa) is a key approach used by operators to analyze the movement of the prices of activities in financial exchanges. It implies the examination of the trend and price moves of prices over time to make informed negotiation decisions. The Paa takes into account several technical indicators, such as mobile media, RSI, Bollinger bands and others, as well as standards of traditional graphics such as trend lines and levels of support and resistance.

How the analysis of prices works

To identify trends using Paa, the traders follow these steps:

• Select a negotiation interval : identify the upper and lower boundaries of a negotiation interval, which is usually characterized by a significant price movement.

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* Inversions: when prices break a stand or resistance level, indicating a potential reversal tendency.

* Fund: when the prices reach a new discharge and then they reversed immediately, reporting a strong high trend.

* Head and shoulders: a classic graphic model that can indicate a continuation of the tendency or inversion.

• Calculate indicators : Use technical indicators to measure the strength and direction of price movements. The common indicators used in Paa include:

* Medium mobile (but): average prices for a specified period, indicating the moment of the trend.

* RSI: a relative force index that measures the extent of the recent variations in prices.

* Bollinger bands: a volatility indicator that represents two mobile mediums with a distance from each other, which represents the interval within which the prices are likely to move.

• Combine the indicators : combine multiple indicators to create a paa system that provides a complete view of market conditions.

Identification of the tendency in cryptocurrency

Using Caa in cryptocurrency, the traders focus on the identification of trends and standards in prices over time. Here are some specific suggestions:

• Look for inversions : identify when prices interrupt support or resistance levels, reporting a potential reversal trend.

• Analyze the escape models

  : look for reasons of loss on the graphic designer, as a strong high trend after a time of inactivity or a low trend after a high trend.

• Pay attention to volatility : recognize when prices volatility increases or decreases, indicating changes in the feeling of the market or in economic conditions.

Example: Identify the trends using the analysis of the price action in Bitcoin

Suppose to analyze the graph of Bitcoin prices in recent months and to identify a strong reversal of trends from November 2019 to January 2020. The graphic descent shows a significant break through $ 30,000 resistance levels, followed by a strong high trend.

Using Paa indicators, like the RSI and Bollinger bands, let’s calculate:

• Medium mobile: but in the short term (20 periods) it is close to $ 27,500, while but in the long term (50 periods) it is about $ 38,000.

• RSI: the RSI in 70 indicates a strong condition of excess supply, indicating that the prices are due to a correction.

• Bollinger bands: the price is negotiated in a mobile track of 20 periods of $ 28,000 to $ 40,000.

On the basis of this analysis, we identified a potential reversal of the trends and we started negotiating the activity with a strong high trend. Over time, we continue to monitor the graphic designer and adapt our negotiations based on, taking into account various market conditions and risks management strategies.

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