The main objective when looking at a chart is to answer a simple question: Who is in control, the buyers or the sellers? The answer is given to us by the trend.
1. The Three Types of Trends
All price action in a market can be classified into one of these three phases:
Uptrend 📈: Buyers are in control. The price is steadily rising. Visually, it looks like the price is "climbing a staircase."
Downtrend 📉: Sellers are in control. The price is steadily falling. Visually, it looks like the price is "sliding down a slope."
Consolidation (Sideways) 횡: There is no clear control. The price moves sideways within a range, without a defined direction. It is a phase of indecision or balance.
2. Tool 1: Price Action (Highs and Lows)
This is the purest and most fundamental form of analysis. Forget all the indicators for a moment and just look at the price structure.
To identify a Bullish Trend: Look for a series of higher highs (Higher Highs - HH) and higher lows (Higher Lows - HL).
Anatomy: The price makes a peak (High), pulls back a little (Low), and then rises above the previous peak (Higher High), and its next pullback stops above the previous low (Higher Low).
As long as this structure holds, the bullish trend remains intact.
To identify a Bearish Trend: Look for a series of lower highs (Lower Highs - LH) and lower lows (Lower Lows - LL).
Anatomy: The price makes a bottom (Low), bounces a little (High), and then falls, breaking the previous bottom (Lower Low), and its next bounce fails to reach the previous high (Lower High).
As long as this structure holds, the bearish trend remains intact.
3. Tool 2: Trendlines
Trendlines are a visual tool to define the trend and act as dynamic levels of support or resistance.
How to draw a Bullish Trendline: Connect two or more "higher lows" (HL) with a straight line.
Interpretation: As long as the price remains above this line, the bullish trend is considered valid. If the price breaks below it with conviction, it is a signal that the trend may be ending.
How to draw a Bearish Trendline: Connect two or more "lower highs" (LH) with a straight line.
Interpretation: As long as the price remains below this line, the bearish trend is considered valid. If the price breaks above it with conviction, it is a signal of a possible trend change.
Professional Advice: A trend line becomes stronger and more reliable the more times the price "touches" and respects it.
4. Tool 3: Moving Averages (MAs)
Moving averages smooth out price action to show the trend direction more clearly. They are one of the most popular indicators.
What are they? A moving average is the average price of an asset over a specific period. The most common are the 50-period (MA50) for medium-term trend and the 200-period (MA200) for long-term trend.
Simple Interpretation:
If the price is above the MA50 and MA200, it is a bullish signal.
If the price is below the MA50 and MA200, it is a bearish signal.
Key Signals (Crosses):
Golden Cross: Occurs when the MA50 crosses above the MA200. It is a very strong bullish signal, often indicating the beginning of a long-term bullish trend.
Death Cross: Occurs when the MA50 crosses below the MA200. It is a very strong bearish signal, often preceding significant drops.
5. Putting It All Together: Your Checklist
When you open a chart on Binance, follow these steps:
Observe the Big Picture: Does the price seem to be rising, falling, or moving sideways in the last few months?
Identify the Structure: Can you clearly see higher highs and higher lows (bullish) or lower highs and lower lows (bearish)?
Draw the Trendline: Connect the key points. Is the price respecting it?
Add Moving Averages (MA50 and MA200): Where is the price in relation to them? Has there been any recent crossover?
Check the Volume: Does the volume increase when the price moves in the direction of the trend? (High volume in rises for bullish trend, high volume in drops for bearish trend). This confirms the strength of the trend.
Practicing this analysis will give you a huge advantage. Over time, you'll be able to identify the trend of an asset in just a few seconds.
Luis Ceballos Bisamón
