Mastering Crypto Trends: The Power of Trend Lines and Levels
Hello Traders! Today we will discuss trend lines and how to use them in trading. Let’s talk about it!
You can find the previous article by following this link:
Trend Lines: What are They?
Here is the chart for an example. There are 3 points we can reference and formulate a strategy for entry.
Now, let's explore a scenario with a descending timeframe.
We observe a descending structure that I've formed based on two points.
And here's a quick tip: when a trend is just beginning to form, the third touch of the trend line is to follow the trend direction. Using this pattern, you can develop a small scalping strategy. Please keep in mind the market context and the impact of volume on price.
(Note: The term "scalping" refers to a trading strategy that aims to make quick, small profits from minor price fluctuations.)
2. There are two entry options - entering from a touch to the trend line and entering on its breakout.
Let's examine the breakout entry option using Matic as an example.
Pay attention to the volume; with each movement, the volume decreases. When you observe such a pattern, there is an additional indication that the bearish momentum has subsided for the time being, and a breakout is likely.
The entry will occur upon the breakout of this trend line, with an additional entry on the retest. I have marked the retest with the number 2.
How to determine the nature of a breakout, whether genuine or false?
Take a look at the coin's backtesting results. Certain coins excel in breakout strategies, while others are better suited for bounce trades. Pay close attention to how volume behaves as the trend approaches. An uptick in volume suggests growing interest and a potential surge in volatility.
Moving forward, let's delve into strategies for trading bounces using the example of UNI/USDT.
As you can see, the volume increased, and on the 3rd touch (which I've marked as entry point number)
We had the opportunity to make a trade. However, there wasn't a notable breakout. Instead, there appeared to be a consolidation of movement. The volume also slightly decreased, indicating that the downtrend movement continues.
When Not to Enter on a Breakout
There are various systems out there, and I'll explain how you can approach this from the standpoint of Price Action and volume observation.
Firstly, volume during a breakout. If the first touch occurred with significant volume. The second touch should ideally have increased volume for the resistance/support level.
The second rule. If the market is in a downtrend, the likelihood of a breakout in the opposite direction is low.
Additionally, focus on the touch of the resistance line. If it completely encompasses the Initial Move Bar (IMB) and is succeeded by a bearish engulfing pattern, the chances of a successful approach diminish.
As an example, I'm attaching a chart for KNC.
Upon approaching the level, there was no significant increase in volume, the market context was bearish, and the likelihood of a breakout was low.
And let’s talk about breakout entry methods. Which one is considered the most reliable? Let's examine this on the chart. While this concept primarily applies to lower timeframes, the logic remains similar on higher time frames.
The distance between a local low and the next one should be at most 1%. A higher volume on the breakout is desirable. A more conservative entry method is from the last local high.
Indicators, what do I focus on when entering a trade?
Let's take the same coin and examine it with the RSI indicator. Anything below the 50 median line is of interest for trade entry. Values above it might indicate local overbought conditions, offering a possibility for considering counter trend entry.
And that's all for today, traders. Leave your comments and let me know which patterns you use for trade entry during trends; I'd be delighted to discuss them with you. Have a great trading week! As always, I appreciate your subscriptions and likes!
You can find the previous article by following this link:
Trend Lines: What are They?
Here is the chart for an example. There are 3 points we can reference and formulate a strategy for entry.
Now, let's explore a scenario with a descending timeframe.
We observe a descending structure that I've formed based on two points.
And here's a quick tip: when a trend is just beginning to form, the third touch of the trend line is to follow the trend direction. Using this pattern, you can develop a small scalping strategy. Please keep in mind the market context and the impact of volume on price.
(Note: The term "scalping" refers to a trading strategy that aims to make quick, small profits from minor price fluctuations.)
2. There are two entry options - entering from a touch to the trend line and entering on its breakout.
Let's examine the breakout entry option using Matic as an example.
Pay attention to the volume; with each movement, the volume decreases. When you observe such a pattern, there is an additional indication that the bearish momentum has subsided for the time being, and a breakout is likely.
The entry will occur upon the breakout of this trend line, with an additional entry on the retest. I have marked the retest with the number 2.
How to determine the nature of a breakout, whether genuine or false?
Take a look at the coin's backtesting results. Certain coins excel in breakout strategies, while others are better suited for bounce trades. Pay close attention to how volume behaves as the trend approaches. An uptick in volume suggests growing interest and a potential surge in volatility.
Moving forward, let's delve into strategies for trading bounces using the example of UNI/USDT.
As you can see, the volume increased, and on the 3rd touch (which I've marked as entry point number)
We had the opportunity to make a trade. However, there wasn't a notable breakout. Instead, there appeared to be a consolidation of movement. The volume also slightly decreased, indicating that the downtrend movement continues.
When Not to Enter on a Breakout
There are various systems out there, and I'll explain how you can approach this from the standpoint of Price Action and volume observation.
Firstly, volume during a breakout. If the first touch occurred with significant volume. The second touch should ideally have increased volume for the resistance/support level.
The second rule. If the market is in a downtrend, the likelihood of a breakout in the opposite direction is low.
Additionally, focus on the touch of the resistance line. If it completely encompasses the Initial Move Bar (IMB) and is succeeded by a bearish engulfing pattern, the chances of a successful approach diminish.
As an example, I'm attaching a chart for KNC.
Upon approaching the level, there was no significant increase in volume, the market context was bearish, and the likelihood of a breakout was low.
And let’s talk about breakout entry methods. Which one is considered the most reliable? Let's examine this on the chart. While this concept primarily applies to lower timeframes, the logic remains similar on higher time frames.
The distance between a local low and the next one should be at most 1%. A higher volume on the breakout is desirable. A more conservative entry method is from the last local high.
Indicators, what do I focus on when entering a trade?
Let's take the same coin and examine it with the RSI indicator. Anything below the 50 median line is of interest for trade entry. Values above it might indicate local overbought conditions, offering a possibility for considering counter trend entry.
And that's all for today, traders. Leave your comments and let me know which patterns you use for trade entry during trends; I'd be delighted to discuss them with you. Have a great trading week! As always, I appreciate your subscriptions and likes!
