Retail investors often struggle to determine when to buy and when to sell. Only less than 10% of investors can accurately identify buying points and enter at the bottom. What turns these investors into trading experts is that support line. Today, Yuanbao will talk about how experts draw support lines!
To draw a support line, you first need to know what a support line is.
1. This is how to draw support and buy at the starting point.
When the price of a coin drops near a certain price level, many bulls believe there is profit to be made, leading to a large amount of buying in the spot market, which halts the price decline and may even cause a rebound. A line drawn at this price level is called a support line. Conversely, there is also a resistance line, and from this, there are also ascending support lines, channel lines, etc. The support line is the most basic, and to understand various extended types, one must first grasp the support line thoroughly.
If you buy near the support line, you can buy at the starting point of the rise. So how can you accurately judge and draw the support line?
Let's take the BTC candlestick chart as an example. First, find the previous low, as shown; then find the second low that is close to the level. Connect these two points with a horizontal line, and as long as there is a third point that rebounds after falling to this line, it can be validated as a support line. If it falls back near the support line again, it can be used as a buying point!
In addition to candlesticks having support lines, moving averages also provide support. The support from moving averages and candlestick support is essentially the same, and the details of moving average support operations will be mentioned below. The theory of support lines is not difficult, but if everyone only grasps some theoretical knowledge and buys in, it may backfire and get stuck in a losing position. For us, how should we buy?
2. Pay attention to these details to improve win rates.
Support and resistance levels are core concepts in technical analysis, used to predict key points in the price trends of cryptocurrencies, stocks, futures, forex, and other financial markets. Below is a comprehensive introduction to support and resistance levels:
1. Definition:
- Support level: Refers to the price level that may encounter support during a decline, thereby stopping the decline and stabilizing.
Resistance level: Refers to the price level that may encounter pressure during an increase, leading to a reversal and decline.
2. Judging methods:
- Previous highs and lows: The high and low points in front of the price often serve as a basis for determining support and resistance positions.
- Key prices: Price integer thresholds and historically significant price levels have support and resistance effects.
Trend line: A straight line connecting the high or low points of price fluctuations, which can act as support or resistance.
- Moving averages: Such as the 5-day, 10-day, 20-day moving averages, are often used as references for support and resistance.
Chip distribution: The distribution area of cost in the market, especially in trading dense areas and volume expansion areas, may form support and resistance.
3. Practical application
- Near the support level, investors may consider buying, as the price may find support at this position and rebound.
- Near the resistance level, investors may consider selling, as the price may encounter resistance and retreat at this position. Breakthroughs of support and resistance levels often signal trend reversals or continuations, serving as important bases for trading decisions.
4. Precautions
- Support and resistance levels are not fixed; they may interchange roles as market conditions change. The validity of support and resistance levels needs to be judged comprehensively in conjunction with market trends, trading volume, investor psychology, and other factors. In practice, it should be combined with other technical analysis tools and fundamental analysis to improve the accuracy of trading decisions.
Mastering the judgment and application of support and resistance levels is of great significance for investors to formulate trading strategies and seize market opportunities.
Through continuous practice and summarization, investors can better utilize these key points for effective risk management.
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