Crypto Trading: The Fibonacci Retracement tool.

Fibonacci retracement. Sounds sophisticated? But what does it do? And does it work?

Luckily for traders, Fibonacci retracements are far more than just a nifty word. In fact, it’s the name of a tool used to predict potential support and resistance levels for price action.

First, let’s define what this so-called “Fibonacci” is so you have a better idea as to why it is a concept relevant to trading cryptocurrencies.

Leonardo of Pisa (A.K.A. Fibonacci) was an 11th-century mathematician responsible for introducing a unique sequence of numbers to the West, now known as the “Fibonacci Sequence.”

The Sequence

0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584… (pattern repeats to infinity)

Each number in the sequence is derived from the sum of the preceding two numbers. Clever, right?

Not only that, but each number is roughly 1.618 times greater than the number before it. This creates a value known as the “golden ratio,” or “phi” and has a fascinating relationship with nearly everything in nature.

Take flowers, for example, the lily is arranged with three petals, buttercups with five, the chicory with 21, daisies with 34 and so on. Interestingly, the numbers abide by the Fibonacci sequence and each petal is even placed at 0.618 per turn (out of a 360-degree circle), allowing for optimal exposure to sunlight and other factors crucial to survival.

Examples of the Fibonacci sequence in nature are seemingly endless and this expands to trading when it comes to analyzing price action.

Specifically, a trader can derive levels in a trend that price is likely to respect by dividing a peak to trough or trough to peak distance by the golden ratio and other ratios in the sequence. Other important ratios include 0.382 which is any number in the sequence divided by the number two places to its right and 0.236, found by dividing one of the numbers by the one three places to its right.

As you’ll come to notice, price reacts to these levels on a regular basis, which can provide a trader with optimal entry and exit points, just like it provides a flower with the optimal structure to absorb sunlight.

Finding Support Levels

Before using the Fibonacci tool to identify potential support or resistance levels, a trader must first be able to identify a “swing high” and “swing low.”

A swing high is simply a candlestick at the peak of a trend in any time frame that has a lower high directly to its right and left. Conversely, a swing low is the low candlestick stick of a trend with a higher low on each side.

Once these points are identified, select the Fibonacci retracement tool in your trading software to connect a swing low to a swing high. Potential support levels will be generated, known as retracements.

Each retracement is derived from the vertical “trough to peak” distance divided by ratios in the Fibonacci sequence.

In the above chart, NEO’s (NEO/BTC) swing low of 0.001834/BTC was connected to the swing high of 0.015170/BTC on the daily time frame using the Fibonacci retracement tool.

As you can see, the retracements of 0.236, 0.382, 0.5, 0.618, 0.786 were all respected as support, at least temporarily, as price rebounded from its September plunge.

If a trader was to take advantage of this tool from November on, he or she would have had an idea as to where price might land before making its next move, revealing ideal trade entry or exit points.

Finding Resistance Levels
The process to find potential resistance levels is largely the same as before, except this time you will be connecting the swing high to swing low.

The retracements will again appear by dividing the distance from peak to trough using ratios in the Fibonacci sequence.

In the above chart, the anticipated resistance levels for Stellar Lumens (XLM/BTC) were calculated using the Fibonacci tool by connecting the swing high of 0.00006335/BTC to the swing low of 0.00002139.

Once again, price reacted to the levels as advertised.

The 0.786, 0.618, 0.5, and 0.382 retracements all provided resistance on several occasions which would have provided a trader with optimal targets to take profits on his or her position.

Conclusion
It’s important to remember that while the Fibonacci tool can be useful in identity supports and resistances, the results are not guaranteed. In order to increase the probability of certain retracements acting as advertised, it is best to use the tool along with other indicators like moving averages or the relative strength index (RSI).

For example, if a moving average is in the same location as a Fibonacci retracement, price is more likely to react to the level given there lie two support or resistance obstacles, which when combined are more powerful than one.

If you went through the sequence calculating each ratio, you may have noticed 0.5 is not one of them yet, it appears as a level in the Fibonacci Retracement tool. Its true, 0.5 is not a ratio in Fibonacci sequence but is included in the tool because it marks a 50 percent trend retracement, which price has a funny way of reacting to as support or resistance.

Do you trade using Fibonacci retracements? if so how do find your success rate? We’d love to know. 


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Author: Sam Ouimet
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Crypto Trading 101 – Calculating Moving Averages

Maybe you’re the type of trader that keeps metrics to make important life decisions?

If you fit the description, you may want to add moving averages to your aresenal to discover just how much they can improve your trading strategies.

Not sure where to begin? Moving averages are a useful tool for tracking the direction and strength of a trend by capturing specific price data points over a specified period of time (as defined by the timeframe you are looking at) to constantly update the average price as it moves along the chart.

Indeed, the position of the moving averages depends upon the nature of the asset you are looking at.

Generally, when prices are below a particular moving average, it signals to traders that the price has lost momentum and the trend has turned bearish (meaning price and sentiment are trending down).

Conversely, if prices are above a moving average it can generally be considered bullish, as long as prices remain on top and have the backing from other indicators such as the Stochastic Oscillator or Relative Strength Index to add to your layers of confirmation.

Simplifying your averages

A good introduction to moving averages and your journey to understanding the basic concepts begins with the simple moving average, which is calculated by taking the mean of a given set of values and plotting it on the chart.

For example, let’s say you were looking at a simple 5-day moving average. You take the closing price of each day, add those values then divide by the number of days, in this case, 5.

It would look something like this:

5, 2, 3, 5 + 4 + 9 + 7 + 5 / 5 = 6   ← Ignoring previous datasets from past days and taking only the recent 5 sets, hence the term moving average.

TIP

The average result of 6, takes into account the previous 5 data points and provides a general idea of how an asset is priced relative to the last 5 days.

Take bitcoin’s recent move for example. The blue line mapped on the chart is the simple moving average representing 5 days or 5 sets of data points.

We can assume, at least in the short-term, that prices turned bullish as the blue line passed underneath the close on August 16 and remained so when prices broke another $100 higher.

We can also spot when prices began to turn bearish back in July as the line moved above the candlesticks’ closing periods, signaling to traders a bull-to-bear trend change and a loss of momentum for any further upside action.

As prices dipped below the line, the bulls were unable to ‘break’ above it and a short-term downtrend ensued lasting 16 days until prices shifted back above, signaling once more, a change in the short-term trend.

The most common periods used amongst traders are the 50, 100 and 200 averages as these have proven and predictable results due to their ability to collect a larger portion of data points.

However, there is no perfect solution for your simple moving average setup, analysts usually devise their own strategies, often employing multiple moving averages in order to provide greater understanding and depth to their analysis.

In time you will get to know each type of moving average and their various uses but for now, you should familiarise yourself with the simple moving average, experimenting on different timeframes to see how each chart reacts.


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Sebastian Sinclair 
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Crypto Trading 101: An Introduction to Support and Resistance

Are you a crypto trader struggling to find a footing in a volatile crypto market?

If yes, then the first thing you need to master is the art of identifying support and resistance levels.

Imagine bouncing a ball inside your house. There are two barriers that will limit the flight and fall of the ball – your floor and ceiling. In trading, there are similar barriers that limit the movement of price action known as support and resistance.

Such barriers in trading can have long-lasting effects on an asset, since price action rarely forgets its past. If traders regard a certain price level as a great entry or exit point, it will likely continue to act as a barrier for prices until all of their respective needs are satisfied.

LIONBIT

Support

For example, buyers will generally continue to buy at a specific price, given the asset is perceived as undervalued, until all of their demand is fully absorbed by the market. So, if buyers engage at X price and the price moves upward only to later return, the same buyers will look to defend their positions at X and potentially add more to their positions.

New buyers will see that price fell no further than X before, so are likely to consider it a safe entry. This concentration of buy pressure will prevent price from falling any further, creating a temporary floor known as support.

Resistance

On the other hand, if an asset is perceived as overvalued at a certain price level, sellers will be sure to take advantage. Here, those large buyers from before will look to exit their position and take profit. It’s also possible traders will enter “short” positions at this level, given the perceived over-valuation, increasing the market’s sell pressure.

Just like when there was high buy pressure, this concentration of sell pressure will force the price level to act as a barrier, except this time it will act as a ceiling, rather than a floor, known as resistance.

Horizontal Support & Resistance

The most important and easiest to identify support and resistance levels take the shape of horizontal lines as a result a trend being rejected repeatedly at a very similar price point.

Horizontal support or resistance lines can be created by simply “connecting the dots” between trend peaks or valleys as seen in the chart below.

In the upper frame of above chart, sellers of XMR/BTC continually push down price from the 0.00451/BTC area, establishing it as strong resistance. Simply put, traders continued to take advantage of this area of concentrated sell pressure.

In lower the frame, buyers continually held up the price of XLM/USD at $0.17 fortifying it as strong support.

Once again, traders repeatedly took advantage of the level given the chart has told them time and time again price is more likely to bounce than fall through.

TIP

Porlarity

So, what happens when these levels are eventually surpassed?

As mentioned earlier, these barriers do eventually break once either the buying or selling efforts have been completely absorbed by the market. When this occurs, a major shift in sentiment can take place – a concept known as polarity.

When the selling behind an established resistance level is fully absorbed, it is no longer perceived as an optimal point to take profit, rather it is viewed as a good entry point for buyers due to the disappearance of sell pressure, as a result turning the resistance level into support.

Conversely, when the buying pressure behind a support level is fully absorbed, it will turn to a resistance level given traders are no longer interested in buying at this price.

It’s important to note that when price breaks through major support it is regarded as bearish development, that is, an asset usually drops further until sellers reach a point of exhaustion. The subsequent rebound due to profit taking or bargain hunting ends up creating a new support level.

Conversely, surpassing resistance is bullish in nature and price tends to follow the breakout until its next resistance level is identified.

The above chart depicts the effect polarity had on the price of XMR/USD once its resistance level of 0.00451/BTC was broken. You can see that what was once established as strong resistance, given it rejected price action on several occasions, became weaker the more it was tested until it could no longer hold down prices.

Price rose emphatically once the resistance was breached due to the large shift in market sentiment that was taking place. Even after prices action cooled off, it fell to the prior resistance left, but this time it held as support – the essence of polarity.

Conclusion

Price trends are expected to take a breather when coming in contact support or resistance lines due to the concentration of buying or selling pressure that awaits. While the levels can act as a barrier to price action for a lengthy period, they don’t last forever as the market will eventually absorb their efforts.

Once this occurs, polarity takes effect and converts the support to resistance and vice-versa.

Long story short, support and resistance levels help identify areas of strong supply and demand. So, identifying major supports and resistances is perceived by many to be the most important aspect of trading.



Here at Dollar Destruction, we endeavor to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Sam Ouimet
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7 Crypto Trading Tips and Common Mistakes

Cryptocurrencies are subject to great debate nowadays. While some top business personalities around the world bill crypto-currencies as futuristic and sustainable, others are widely skeptical and compare them to a fragile bubble waiting to burst.

Rates of major crypto-currencies have soared over recent months. And they have dropped too. For example, the world’s single largest crypto-currency, Bitcoin (BTC), closed at US$ 14, 129 on December 31, 2017.

Barely three months later Bitcoin traded at US$ 8,547 a coin. Similar ups and downs are evident with other crypto-currencies including Ethereum,  Altcoin, Ripple, Litecoin, and Cardano, to name a few. Hence, it is prudent to be extra cautious while investing in crypto-currencies.

Should you be interested in trading crypto-currencies, here are some tips and common mistakes you can avoid.

Why Invest in Crypto-Currency?

This is the first question you should be asking. If the reasons are for getting high returns, you should probably forget Cryptocurrencies altogether. There are no guarantees that crypto-currency prices will rise.

Nor are there any buffers should its prices continue to slide, as will be evident from the performance of Bitcoin and other major crypto-currencies.  Since crypto-currencies are not regulated like conventional fiat currencies, you are not assured of returns on an investment.

A sudden surge may net you immense profits while unexpected drops could result in heavy losses, depending upon rates that you paid for a crypto-currency. Speculation in crypto-currencies remains fairly low due to these inherent risks.

Invest in Several Crypto-Currencies

Crypto-currencies are expensive. Should you wish to invest, it is advisable to create a portfolio of various cryptos rather than investing merely in one or two that are the most popular. Rates of various crypto-currencies fluctuate regularly.

Hence, if your investment on one crypto drops, you can derive some buffer from others that are rising. Never buy crypto-currencies when rates are on the upswing. These increases are seasonal and can prove misleading- which is evident with Bitcoin.

Instead, study rises and falls during a span of one year to arrive at a median price. Always place an order to buy cryptos at rates below this median price. Thus, whenever a crypto-currency rate drops, you are buying some for your portfolio.

Hence, you need to watch constantly for peaks, drops and market corrections. There are some ways and means to earn free Bitcoin or at least a fraction of Bitcoin called Satoshi. Before leaping at these offers, ensure that the website or scheme is genuine and not a scam.

Place Orders with Exchanges

With crypto-currency exchanges, you can use a system called ‘limit orders’ rather than ‘market orders’ floated by brokers. Limit orders allow you to pay minimal fees while buying cryptos. This is because ‘limit orders’ are based on the price at which you wish to buy a crypto-currency.

Hence, your order may take some time for fulfillment. On average, you pay 0.25 to 0.4 percent fees of the value of transaction on ‘limit orders’ which can surge to 1.5 to 2.0 percent on ‘market orders.’

Place your order for a fixed price when rates of a crypto are on the decline. This ensures you get them at a rate you wish to pay rather than what the market demands. The system allows you to add more coins to a portfolio, though it can take some time.

Choose Long-Term Investments

To strike big with crypto-currencies, stay invested for longer terms. This offers several benefits while building a portfolio with cryptos. Firstly, you get opportunities to buy low at the right entry point and hold without bothering about market corrections and occasional dips.

It also helps to prevent undue panic selling, should prices of a crypto plunge without warning. While you can buy more during severe drops, never sell whatever cryptos you hold.

Instead, retain them for a fixed number of months or years, like any conventional currency term deposit. Crypto markets operate 24x7x365. The longer you hold – the more you can buy at low rates and sell when the market is at peak.

Avoid One-Time Investments

Simply, this means you should not put all your money into buying various cryptos on a specific day or period. Instead, stagger your investment in various crypto-currencies. Look for highs and lows.

Keep enough money to buy when any crypto hits the lowest mark compared with its prices in preceding months. For this, you need to finalize how much you intend to invest in crypto-currencies and draw plan about which crypto would feature in your portfolio.

Never opt for more than 10 different crypto-currencies for your portfolio since managing them gets cumbersome. An ideal crypto portfolio would consist of high, medium and low price coins as well as those emerging on the market and showing promise of good growth.

Beware of Scams

Unfortunately, the crypto-currency world is full of scammers. They pose as legitimate crypto-currency exchanges and brokers or even blockchain miners. Generally, these scams will offer you crypto-currencies at very attractive prices that tempt you to invest.

Similar to other scams, they vanish once you have made payments. Other scammers may ask you to trade Bitcoin for another high-performance crypto. They will offer a large number of one or two crypto-currencies at rates much lower than other legitimate exchanges.

Also, beware of dubious deals that may ask your username, passwords, and other access codes to your online, offline, or hardware crypto-currency wallet. These dealers will defraud you of every crypto-currency accumulated should they gain illegal access. There are no known ways to trace out who has stolen your crypto-currencies.

Use Hardware Crypto Wallets

You can buy excellent hardware wallets to store your crypto-currencies at prices starting from US $70. Look for hardware wallets that offer highest levels of security such as multiple passwords, fingerprint access and other features that can prevent your cryptos from falling into wrong hands.

Hardware wallets also come with an inherent problem: misplacing one or forgetting usernames, password, and other accessible details mean a loss of your investment. Regardless, hardware wallets are much better since you remain protected from illegal access by hackers to online and mobile wallets.

You can connect a hardware wallet to the internet from any location to trade in crypto-currencies. Always buy hardware wallets from reputed vendors to ensure they are not rigged to leak your username and passwords.

In Conclusion

For a beginner, it is essential to read every available information about crypto-currencies, right from their evolution to current scenarios in the financial market. Also, ensure that crypto-currencies are legal in your country and trading would not get you into trouble with the law.

As more criminals turn to crypto-currencies to fund their nefarious activities, the crypto trade is losing its fabled anonymity. Indeed, transactions can come under the scanner of law enforcers and tax authorities.

Regardless, with sufficient knowledge of crypto-currencies, some online tutorials, tips, and tricks on investing in these futuristic tender will help you reap rich returns.


Here at Dollar Destruction, we endeavour to bring to you the latest, most important news from around the globe. We scan the web looking for the most valuable content and dish it right up for you! The content of this article was provided by the source referenced. Dollar Destruction does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. As always, we encourage you to perform your own research!

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Author: Anulipa Nandi
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A Guide to Crypto Terminology

General Terms

Bitcoin: the first decentralized digital currency, and currently the best known and most expensive;
Cryptocurrency: a digital asset designed to work as a currency, that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets;
Blockchain: a continuously growing list of records, called blocks, which are linked and secured using cryptography, and acts as the basis for cryptocurrency due to its decentralization and immutability;
Decentralization: the property of not being owned or controlled by a single individual or group of people, thus being more resistant to inside manipulation;
ICO: short for Initial Coin Offering, a means by which funds are raised for a new venture, where some of the cryptocurrency is sold to early backers of the project;
Mining: the process of trying to ‘solve’ the next block to obtain an amount of cryptocurrency. In many cases it requires huge amounts of computer processing power;
Wallet: storage of ‘keys’, or codes, needed to access and use one’s coins. There are online (“hot”) wallets and offline (“cold”) wallets;

Technical Terms

Address: the location from which you would receive, send or hold your currency, generally manifested in a long string of alphanumeric characters;
Altcoin: “alternative coin”, any cryptocurrency that is not Bitcoin;
Distributed Ledger: an agreement of shared, replicable and synchronized data, in this case spread across multiple networks, across many computers;
51% Attack: a situation where more than half of the computing power on a network is operated by a single individual or concentrated group, which use this power to control a network;
Fork: a permanent divergence of an alternative operating version of the current blockchain; come into existence when a 51% attack occurs, a bug in the program, or more commonly a new set of consensus rules come into existence;
Multisig: needing more than one signature to approve a transaction;
P2P or Peer-to-Peer: a system where peers (equally privileged, equipotent participants) share resources amongst each other without the use of a centralized administrative system;
Smart Contract: It’s a computer code that simplifies the execution of certain agreements and eliminates the need for a middleman;

Trading Terms

Exchange: a website where you can buy and sell cryptocurrencies;
Fiat: government-backed cryptocurrency, such as the US dollar or euro;
Whale: someone who owns an obscene amount of cryptocurrency, so that their trading would move the market a lot, the way real whales displace a lot of water around them;
Margin trading: an act of ‘magnifying’ the intensity of your trades by risking your existing coins, often equated to gambling, and forbidden on many exchanges;
Bull/bullish: optimism for prices, the expectation that the price is going to increase;
Bear/bearish: pessimism for prices, the expectation that the price is going to decrease;
ATH: short for all-time high, the biggest value a cryptocurrency has ever reached;
Shilling/pumping: advertising another cryptocurrency by making it sound too good to be true;
Pump and dump: a fraud scheme that originated on Wall Street, where a group of people artificially increase the price of a coin, bringing attention to it, then sell it to unsuspecting victims and watch the price crash;
Bagholder: someone who still holds an altcoin after a pump and dump crash; alternatively, someone who owns a coin that is steadily falling;
Market cap: the total value of a cryptocurrency network, calculated by multiplying the total supply of coins by the current price of an individual unit;

Inside Jokes, Memes and General Abbreviations

HODL: a misspelling of “hold”, means to not sell your cryptocurrencies; alternatively described as meaning Hold On for Dear Life;
Lambo: short for Lamborghini, which is what cryptocurrency enthusiasts want to buy with their crypto trading profits, as opposed to Ferraris (because they’re a “Wall Street thing”);
“This is gentlemen”: originally a misspelling of “this is it, gentlemen”, but now used as a way to point out nice things, such as the rise of your coin of choice;
Mooning: a price going up astronomical levels; an alternative is, “to the moon!”;
FUD: Fear, Uncertainty, Doubt, a phrase that describes the heightened sense of panic and anxiety which can sometimes affect the prices on the market, usually caused by misinformation;
FOMO: Fear Of Missing Out, getting into cryptocurrency trading so that you do not miss out on the prices eventually surging and thus profiting you;
Shitcoin: an altcoin that turns out to be either worthless or downright scammy;
DYOR: Do Your Own Research, means do not trust everyone on the internet, instead research it by yourself or ask a professional;
Buy the Dip, Sell the Peak: the meaning is literal, if you want to profit, buy the coin when it’s at its lowest and sell it when it rises in price.


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