Using Trendlines in technical analysis is crucial to becoming a successful trader. I do not know a single trader that does not incorporate trendlines in their day-to-day trading regimen. Let’s learn what a trendline is, but let’s also understand where a good spot to insert them on the chart too! Follow along with this literature and charting (with pictures) to help make it the easiest way to understand for YOU!
Check out this chart here on Bitcoin’s current price based upon a daily timeframe:
As you can see, from the peak of Bitcoin at roughly $69,000, Bitcoin has dropped in price significantly. As the price of Bitcoin has come down over the past year, you can see where the price tried coming back up but got rejected by that white line on the chart. This white line is known as a Trendline (used as an indicator for Technical Analysts). Trendlines are drawn to show where price movement is either rejected or bouncing off the line. The price will touch the trendline and then keep moving in the general direction of the price trend. Once the trendline is “broken through” in either direction will then dictate the next significant price movement. Once this chart of the Bitcoin price can push through to the upside of the trendline, we will then start to see some fantastic upside gains in the return value. This current white trendline drawn on Bitcoin is a MAJOR trendline keeping the price below. As stated above, once the price goes above the trendline and continues upward, we will start a new bull run (potentially).
There are no guarantees in technical analysis concepts or trading/investments, but these tools can help you make better trades. None of this literature should be taken as financial advice but only used to YOUR advantage if you choose to do. Always do your research before making any trade or investment!
Don’t forget to give me a follow-on Twitter (@MattSenn5) for daily fundamental and technical analysis concepts, all generally crypto-related. Also, please take a moment to check out my crypto team New Century Gold, and we can teach you how to start making passive income in crypto!!
Written by: Matt Senn