Hello everyone! Today’s 100-day challenge in the currency circle, let’s talk about two important concepts in technical analysis of the crypto market: support and resistance. They are important tools for traders to judge market trends and formulate trading strategies. By understanding support and pressure lines, we can interpret market behavior more clearly and seize the opportunity to buy and sell.

Spring bed and ceiling

  • Support is like a bed spring, when price hits this area, it is likely to bounce back up

  • Pressure is like a ceiling. When the price approaches this level, it may not be able to break through and fall back.

What is support and pressure?

  1. Support

    • Support is an area where when prices fall to a certain level, a rebound occurs due to increased buying demand.

    • A support line is a horizontal line that indicates a price level that is attractive to the market and provides a price bottom.

  2. Resistance

    • Pressure is the area where when prices rise to a certain level, a pullback occurs due to increased selling demand.

    • The pressure line is a horizontal line, indicating that the price has a suppressive force on the market and forms a price top.

How to judge support and pressure?

  1. Historical Price Action: Look at historical data to find levels at which price has bounced or fallen back multiple times

  2. Volume: When volume in a support or resistance area is higher, it indicates that the area is more effective.

  3. Technical indicator assistance: Use technical indicators such as moving averages (MA), Bollinger Bands or Fibonacci retracements to identify potential support and resistance levels

  4. Round number points: Important round numbers, such as $10,000 or $1,500, often become psychological support or pressure areas

Application of support and pressure

  1. Develop a trading strategy

    • Buying strategy: When the price is close to the support level and a rebound signal appears, consider entering the market

    • Selling strategy: When the price is close to the pressure level and shows signs of falling, you can consider leaving the market

  2. Trend analysis: When the price breaks through the pressure level, it may mean that the trend is upward; when the price falls below the support level, it may mean that the trend is downward.

  3. Stop-loss and take-profit settings: Set stop-loss below the support level or above the pressure level to control risks; set take-profit when breaking through key areas to protect profits.

Breakthroughs and false breakthroughs of support and pressure

  1. Breakout: When the price effectively breaks through the pressure or support area, accompanied by an increase in trading volume, it may mean that the market has entered a new trend.

  2. False Breakout: If the price breaks through briefly and then quickly falls back, it may be a bullish or short-inducing behavior in the market. Need to be confirmed in combination with trading volume and other indicators

Challenges and Risks of Support and Pressure

  1. Regional ambiguity: Support and pressure are usually not precise prices, but a certain area, which may lead to misjudgments

  2. Market news interference: Breaking news (such as policy changes or major events) may invalidate support and pressure

  3. Over-reliance on technical analysis: relying only on support and pressure to trade may ignore changes in fundamentals

Summarize

Support and resistance are the cornerstones in technical analysis of cryptocurrency markets, helping us better understand price action and develop trading strategies. By observing historical data, trading volume and technical indicators, we can identify potential buying or selling areas, thereby seizing opportunities and controlling risks in volatile markets! 【79/100 accumulated】

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