A Beginner's Guide to Crypto Trading
Trading can seem complicated, but it's built on a few core concepts that help you understand what the market is doing and what might happen next.
Support and Resistance
Support: This is a price level where a downtrend is expected to pause or reverse because there is a concentration of buying interest. It acts as the lower trading range, where buyers step in, creating enough demand to stop the price from falling further. On your chart, this would be a line connecting the lowest points the price has reached.
Resistance: This is the opposite—a price level where an uptrend is expected to pause or reverse due to a surge in selling pressure. It acts as the upper trading range, where sellers enter the market, creating enough supply to stop the price from rising higher. On your chart, this would be a line connecting the highest points the price has reached.
A key concept is that when a price breaks through a support or resistance level, their roles often flip. For example, if the price breaks above a resistance level, that former resistance can then become the new support level.
Pullbacks, Reversals, and Breakouts
These terms describe how the price interacts with support and resistance levels.
Breakout: This is when the price decisively moves above the upper trading range (resistance) or below the lower trading range (support). A breakout signals that the trend may be about to continue in the new direction. For example, if the price of TOWNS/USDT breaks above a strong resistance, it could be the start of a significant upward move. Breakouts are often considered more reliable when they are accompanied by an increase in trading volume.
