Trend lines and price predictions: Knowing how when to buy and sell for beginners
The good thing about cryptocurrencies is that, at some point, they can be predictable as to when the price will continue to be bearish or bullish. They do not disappoint most of the time, especially if you have placed your indicators right. They guide traders in knowing when to buy and sell their hodlings to maximize their profits.
A chart pattern can be read in a number of ways, but for beginners, understanding the trend lines is the fundamental skill they must possess in order for them to avoid long-term temporary losses and even permanent ones. Before trading, they have at least a working knowledge of spotting them to place buy orders at the optimum price properly. But before we turn on our eagle eyes to look for trend lines, let’s define it first.
Trend lines, defined
Trend lines work like support and resistance levels that we tackled before, but instead of horizontal lines to determine each crypto’s ceiling and floor price, we use diagonal lines. What trend lines generally do is connect specific data points, making it easier for traders to visualize the price movement.
Trend lines can have positive or negative slopes: ascending and descending, respectively. When the slope is ascending, the price will continue to move as long as the trend is not broken. It will continue in that fashion so long as the key points continue a straight diagonal line, or else the negative slope will follow.
The necessity to follow trend lines
Analyzing the general trend or price movement of the crypto is essential in maximizing your profits. Before investing, you should first look at the chart to determine what cycle the market belongs and decide whether it’s the right time to put your money to grow. Without doing so, it might take some time for your portfolio to see an improvement, and you could lose the opportunity to further your expected ROI.
A perfect example would be BTC’s chart. There’s an established trend that can be seen and followed. Analyzing it gives us an idea that the price is currently on a dip and might go even further to establish the trend line, depending on how the market plays out based on the underlying factors. However, if it goes beyond the trend line, that could be a signal for some to sell, Take Profits (TP), and wait for it to establish another ascending slope.
Extending the trend line will give us a glimpse of how the market will perform and affect our portfolio. It also provides insights into how the market will play out and set our perspective straight regarding the volatility of the crypto project. Since crypto markets follow a pattern, as we know from years of following them, this gives us some assurance that it will not suddenly drop dead and break the usual structure.
However, there is a caveat when following trend lines, some of them could mislead and confuse you. One must never forget to zoom out before looking for the trend line when viewing the chart. Once your chart is only for seven days, this will not show the bigger picture showing the totality of the actual trend line. Thus, you will not have the essential data you will need to decide whether to buy or sell your crypto correctly.
This happens a lot of time, and most people’s sentiments you hear online are about regretting either selling too soon or buying at ATH. Zooming out the chart will paint a complete picture of where the price is currently at, and it provides valuable information to use as a guide before investing.
Reading the charts is the best asset a trader must-have. They are your best friend in trading. This is why it must be stressed to know the basics of reading the charts before actually investing in crypto. It will be like betting on your money without knowing how the game works without such.
While it may be intimidating at first, it gets better over time. Reading charts is a skill anyone can acquire with practice and through the help of experience. Like neophyte traders, I was once a blank slate. But through DYOR and through time, analyzing charts is now a breeze.
Stay foolish. Stay hungry
Also Read: Ask the Orb: The importance of D.Y.O.R.