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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Coinbase Will Add GBP Support to Ease Withdrawals in UK

The Coinbase UK CEO has confirmed that support for GBP withdrawals and deposits will be rolled out over the next few weeks. In an interview with NewsBTC, he also said that Coinbase Custody has had a ‘lot of interest’ and that they have had to restrict how many investors they can take on.



Support for GBP Payments Incoming

Coinbase UK CEO Zeeshan Feroz said that Coinbase will be supporting GBP wires in the next few weeks. At present, Coinbase use Estonian bank LHV to process payments which are all done in euros. UK users have to withdraw euros from Coinbase using SEPA transfers or via mobile banking apps such as Revolut.

In March, Coinbase partnered with UK bank Barclays which opened them up to both GBP payments and the Faster Payments Scheme. This is one of the first collaborations where a UK bank has agreed to accept money that was previously held as a cryptocurrency.

Feroz told NewsBTC: “The biggest thing for me is rolling out access to faster payments for UK consumers. It’s been a huge challenge for us and I think it was a good result for us to get access to that. Over the next few weeks, we’ll be rolling that out for all customers. UK users will be able to deposit Sterling and withdraw Sterling out into their bank accounts using faster payments.”

Huge Interest by Institutional Investors

Currently, 6% of Bitcoin transactions are made in GBP and the UK economy is the fifth largest by GDP. Feroz has previously pointed out that the UK market is the largest in Europe. However, Coinbase are not just looking to attract individuals but have recently launched a suite of products aimed at instituitonal investors.

On Coinbase Custody, he said: “We have had a lot of interest in custody. We have a pipeline of business, we selected a handful that we’re launching with and we will look to add more on. At the minute, we’re restricting the funnel as to how much we can take on until we feel the project is mature and we’ve taken on the first few customers and ironed out the initial kinks. Then we’ll open it up more.”

When asked if Coinbase will always support the same coins and tokens on both their consumer products and their instituional products, Feroz made reference to recently-acquired Paradex, an exchange based on the 0x protocol which offers support for ERC20 tokens. Coinbase also said recently that they plan to support ERC20 tokens.

Feroz said: “We will start to take a product-specific view in terms of the regulatory profiles of coins and the service they’re providing and if that allows us to extend it beyond the four coins we have, then that’s what we’ll do. You will see our businesses as they grow, the coins supported will maybe diverge. One example of that is Paradex which today is live in Europe with eight coins.”

Feroz also said that while they are looking for regulatory certainty, it is not getting in the way of adding new tokens. He said Coinbase will ‘continue to look into tokens that aren’t securites and add them in the future.’ Pointing out their new broken-dealer and ATS licences in the US, he said that they will be able to offer tokens that are registered with the SEC.


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: TIM COPELAND 
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