Volume, Support, Resistance ... what are you talking about?

lbi-token (75)in LeoFinance • 4 years ago

I start to understand why I didn't make much profit before!

Every week I try to learn a bit more about trading. And every week I come more to the conclusion that there are so many things important to learn about before you can really start to make profit. It's not as easy as I thought it would be, and now that I'm reading more and more about it, I'm wondering how the hell I could even think I would do well with a simple BUY LOW, SELL HIGH. There really is so much more in it. And I really can see why I didn't make much profit at all.

Not only candlesticks are important

As soon as you start trading stocks or cryptocurrency you will be faced with quite a learning curve. At least you really need to learn about trading when you want to make bigger profits. It is not easy to start understanding what those candlesticks are doing now, but if you start to understand that a little, there are really other things that also require your attention. Because the candlesticks alone are not enough to understand the cards properly, and certainly not enough to make really well-considered choices when you step in to buy, or when you step out to sell.

You also have to deal with concepts like Volume, Support and Resistance to name a few.

These are all technical indicators that can help you make a good decision that can significantly increase your chances of winning.

Personally, I think that these indicators are even much better to make a choice for the longer term. But then let's see what the volume says, for example.

Emotional involvement

So you can see the volume a bit as the emotional involvement of the market in which you find yourself. Buying may seem like a rational decision, but it is precisely by buying or selling that many traders become emotionally involved. They long to make the right trade, which is why you can also see the size of the volume as the emotional commitment among the traders in the market.

It must be said that the volume is relative, and must always be compared with the same coin at a different time. The volume in a coin like Verge can be very high while the same would mean nothing for Bitcoin.

Bullish or Bearish

Volume can be used to help you estimate how strong or how weak a particular movement or signal is on the market. Suppose a cryptocurrency price goes up, but the amount of volume would remain the same, or go down. Then you see a lack of interest from the market here. And that is a possible warning of a reversal of the bullish trend. If a price goes down, and the volume would rise significantly, then you have a clear signal here that this bearish trend is supported and the price could fall much faster. The rising high volume then shows that the bearish trend has a lot of support from the market, and that will not just change.

By estimating what is going on by looking at the Volume you can bring it back to actually 4 situations;

BULLISH TREND, LOTS OF VOLUME
BULLISH TREND, LOW VOLUME
BEARISH TREND, LOTS OF VOLUME
BEARISH TREND, LOW VOLUME

The bullish trend, with a lot of volume, is a nice to see if you decide to buy a coin. Especially if you are only just at the beginning of the trend. Because a bullish trend with a lot of volume is a good signal that there is a lot of support from the market for this bullish trend and this trend will probably continue in the same way with a rising price.

On the other hand, a low volume bullish trend may signal that there is little market support for this trend, and thus may indicate that this rise will not continue for long. The trend will maybe reverse and the price will fall. Depending on situations in the past, you could in such a case see where the support and resistance are. If you would already decide to buy this coin, you can see whether you are buying now or whether you wait for the price to go down drop to buy a dip.

Then the bearish trend with a lot of volume, which indicates that this is not a good time to step in because this bearish trend has a lot of support from the market and will therefore not turn soon into a bullish trend again. Stepping in at this point will almost certainly give you a loss. Not so handy, and better keep an eye to buy on the bottom if you want this coin. For this you can again look at where the support lies to know when you decide to join.

And the last… the bearish trend with little volume. And that is a difficult one to say something about, because bearish trends are often accompanied by little volume. In situations like this, it is wiser to rely on your own belief in this project, and take other technical indicators, compare charts from other times and maybe wait ... because as they say on Wall Street, “It takes buying to lift prices up, but they can fall of their own weight ”

Then you hear people talk about the support and resistance. What is it? And how do you actually determine it?

Again, you have to deal with the emotional side of trading. A support level is a price level where the price of the crypto almost cannot fall through. It is a price at which many buyers step in again and thus keep the price at and above this level.

A resistance is a price level that it seems almost impossible to break through upwards. At the moment there are many people who sell, which will cause the price to fall again. Strong resistance from sellers to let the price climb higher.

What applies in both these cases is that a support through which the price falls can now act as resistance. And a resistance that the price manages to break through can then act as support.

Next week we will look at another very important part of trading that you definitely need to learn to make good use of all the information that can be read from graphs. We will then talk about the CHART PATTERNS that you must be able to recognize.

Happy Trading!

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