There are always retail investors who can't figure out when to buy and when to sell. Only less than 10% of investors can accurately judge buying points and buy 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 must first understand what a support line is.
1. Draw support this way, buy at the starting point of the rise
When the price of the currency drops to a certain level, bulls believe there is profit to be made and buy a large amount of spot, causing the price to stop falling and even possibly rebound. Drawing a line at this price level is called a support line. Conversely, there is also a resistance line, and additionally, there are ascending support lines, channel lines, etc. The support line is the most fundamental; to understand the various extended types, one must first thoroughly understand the support line.
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 in the figure; then find the second low point that is close to the level. Draw a horizontal line connecting these two points, and the next time there is a third point that falls back to this line and rebounds, it can verify that this is 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 have support. The support of moving averages and candlestick support serve the same purpose; the details of moving average support will also be mentioned below. The theory of support lines is not difficult, but many people only grasp some theoretical knowledge and then buy, which may backfire and lead to being trapped in a losing position. So how should we buy?
2. Pay attention to these details to improve win rate
Support and resistance levels are core concepts in technical analysis, used to predict key points in the price trends of cryptocurrency, stocks, futures, foreign exchange, 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 be encountered when the price declines, thereby stopping the decline and stabilizing.
Resistance Level: Refers to the price level that may be encountered when the price rises, thereby reversing to decline.
2. Judging Method:
- Previous Highs and Lows: The high and low points in front of the price often serve as the basis for judging support and resistance positions.
- Key Prices: Round numbers and historically significant price levels have support and resistance effects.
Trend Line: A straight line formed by connecting the high or low points of price fluctuations, which can serve as a support or resistance line.
- Moving Average: Such as 5-day, 10-day, 20-day moving averages, etc., often used as references for support and resistance.
Chip Distribution: The area of cost distribution of chips in the market, especially in trading intensive areas and volume 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 level and rebound.
- Near the resistance level, investors may consider selling, as the price may encounter resistance at this position and fall back. Breaking through support and resistance levels often indicates a reversal or continuation of the trend, serving as an important basis for trading decisions.
4. Notes
- Support and resistance levels are not fixed; they may interchange roles as market conditions change. The effectiveness of support and resistance levels needs to be judged comprehensively considering market trends, trading volume, investor psychology, and other factors. In practical operations, 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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