- Resistance – Act as a ceiling for the price lines.
- It prevents the price from rising further.
Cryptocurrencies are becoming magnificent for the people of netizens (the citizens of the internet). With the boom of bitcoin and several memecoins, the craze for these digital assets is getting hyped. People love to own and trade these types of digital assets. As a result, more trading platforms are coming to help in this wholesome process of exchange and trading.
But, the main question arises in the mind of crypto traders is whether the conventional trading concepts apply in the world of crypto trading. More specifically, can we use support and resistance levels in crypto? To make it more clear about it, let’s deep dive into the concept of support and resistance and try to find out how they impact crypto trading.
What are Support and Resistance?
The whole trading industry is based on predictions and assumptions. It is quite difficult to tell whether a particular crypto will boom orgo downward. But it is not impossible to predict the nature of a crypto. Every crypto follows a pattern which can be analyzed with some technical indicators. Support and resistance are two such pre-defined indicators which helps in understanding the whole process of trading.
Support is a price level in the trading chart where buying activity increases and tends to stop the assets’ price from decline or fall. It is a price point at which sellers are hesitant to sell and buyers are more inclined to purchase. The buyers push the demand and make the assets’ price higher. In this trading, support 1 is $21897.78 of Bitcoin (BTC). It indicates that buyers are more likely to purchase crypto at this level.
Resistance is a price level in the trading chart where selling activity increases and tends to stop assets’ price from increase or rise. It is a price point at which buyers are hesitant to buy and sellers are more inclined to sell. The seller pushes the supply and makes the assets price lower. In this trading chart, resistance 1 is $28726.30. It indicates that sellers are more likely to sell crypto at this level.
These support and resistance levels are often chosen with the help of highs and lows. Highs and lows is a method in which you consider at least two previous highs and two previous lows for deciding the resistance level and support levels, respectively. The two previous points, both high and low are mandatory but it will be better if one considers more then two previous points as the reliability of these methods depends on how many previous points were taken into consideration.
How to use Support levels in Crypto Trading
- They can help in entering new long positions. As soon as the price bounces off the support level, the trading line will show an upward trend.
- A buyer can stop – the loss order to limit losses in case of downward trend.
How to Use Resistance Levels in Crypto Trading
- They help the trader in the short-selling process as the trader can identify the right time for it.
- It can help in existing long positions if resistance levels fail to breach multiple times.
- The resistance levels help traders to book profit at the right time by creating a sell-stop order.
Conclusion
We get to know that conventional concepts don’t change with the time of change in trading. The rules are the same even if the markets or assets have been changed.
In addition, support and resistance levels can play an important role in the decision of buyers and sellers. While support levels act as a floor for the price line, the resistance levels act as a ceiling for the price line.
Furthermore, the investors can choose many technical indicators to decide the support and resistance level.
