I was thinking about this educational material for a long time and finally I have the chance to share it with you, all of you who want to improve your trading style, to be more profitable. This is specially for those who find it too difficult to trade and everything goes against them. I spent years to improve myself and become profitable, starting from the bottom, never had a personal teacher and never went to a finance university, learning everything by myself. A lot of times I wished to have someone who could help me or give me some tips but I had to learn everything on the hard way
I will start with the thing that I think is the most important in profitable trading .
Price action. Listen, there are a lot of strategies out there which work, everybody has their own style. Boolinger bands, pitchforks, heikin ashi candles, renko and dozens of indicators. All indicators are made from price action; open/close high/low of candlesticks.
Price action is the most important tool for a trader. It is used by institutional traders, by big houses and is the most accurate indicator of an asset, for the next move. And here I will teach you how to use price action in your favor.
On a daily chart, you can put a moving average to see clear how is the trend. Is there a bullish market, bearish market or ranging. Let’s see for example on my chart the 20 period Exponential moving average. After price action, the 20- period EMA is very important, especially on a daily chart for bitcoin because it acted like a resistance for many times this year. You can check the chart. Why not a single top trader from TV is using or telling something about it is a mistery for me. Few days ago I could bet the last move up will find difficulties to march further when it touches the 20 EMA. So simple. Let’s go back on price action. I marked on my chart LOWER HIGHS and LOWER LOWS. When you see a market moving like this you don’t want to go LONG until this trend is over or is bouncing back from a strong trend line.
First rule of a reversal; keep this in mind: If there is a downtrend the price has to make a higher low and then a higher high for a clear confirmation of reversal. In case we have a trend line wich acts like a support and if price bounces from it we don’t need to wait for a higher low and higher high. Let’s say we exclude that trend line, for a revearsal, usually the price needed to stay above the previous low made on 28th of May at 7065 dollars; then move higher than the previous LOWER HIGH marked by me with yellow, and after that a retest of it. Retests of the previous lower high usually occur and that is a clear confirmation of a revearsal. This is the most important weapon you need to master to be profitable in trading.
Same thing is when the trend changes from moving up to go down. First, you have HH and HL , then usually fails to make a higher high, it drops lower than the previous low, goes a little bit up again to retest the previous low and boom, trend is changed, the market is falling. Perfect example look for Bitcoin’s price action from 25th of February to thirtheen of march (on a daily time frame- is easier on the beginning because it takes out the noise).
Look for trendlines, try to analyse how long can you do it to see everything, the details. Support and resistance zones are very important also, look at my chart white dotted lines around 7800. See how the marked reacted around them and try to memorise. You have to learn the chart patterns. The most of the time you will see wedges, flags and triangles and around revearsal zones there will be double tops, bottoms, head&shoulders. Try to learn them and practice to recognize them because it will be easier for you in future, helping you to know where the price will go. There are a lot of tutorials about chart patterns on the internet.
I will start with the thing that I think is the most important in profitable trading .
Price action. Listen, there are a lot of strategies out there which work, everybody has their own style. Boolinger bands, pitchforks, heikin ashi candles, renko and dozens of indicators. All indicators are made from price action; open/close high/low of candlesticks.
Price action is the most important tool for a trader. It is used by institutional traders, by big houses and is the most accurate indicator of an asset, for the next move. And here I will teach you how to use price action in your favor.
On a daily chart, you can put a moving average to see clear how is the trend. Is there a bullish market, bearish market or ranging. Let’s see for example on my chart the 20 period Exponential moving average. After price action, the 20- period EMA is very important, especially on a daily chart for bitcoin because it acted like a resistance for many times this year. You can check the chart. Why not a single top trader from TV is using or telling something about it is a mistery for me. Few days ago I could bet the last move up will find difficulties to march further when it touches the 20 EMA. So simple. Let’s go back on price action. I marked on my chart LOWER HIGHS and LOWER LOWS. When you see a market moving like this you don’t want to go LONG until this trend is over or is bouncing back from a strong trend line.
First rule of a reversal; keep this in mind: If there is a downtrend the price has to make a higher low and then a higher high for a clear confirmation of reversal. In case we have a trend line wich acts like a support and if price bounces from it we don’t need to wait for a higher low and higher high. Let’s say we exclude that trend line, for a revearsal, usually the price needed to stay above the previous low made on 28th of May at 7065 dollars; then move higher than the previous LOWER HIGH marked by me with yellow, and after that a retest of it. Retests of the previous lower high usually occur and that is a clear confirmation of a revearsal. This is the most important weapon you need to master to be profitable in trading.
Same thing is when the trend changes from moving up to go down. First, you have HH and HL , then usually fails to make a higher high, it drops lower than the previous low, goes a little bit up again to retest the previous low and boom, trend is changed, the market is falling. Perfect example look for Bitcoin’s price action from 25th of February to thirtheen of march (on a daily time frame- is easier on the beginning because it takes out the noise).
Look for trendlines, try to analyse how long can you do it to see everything, the details. Support and resistance zones are very important also, look at my chart white dotted lines around 7800. See how the marked reacted around them and try to memorise. You have to learn the chart patterns. The most of the time you will see wedges, flags and triangles and around revearsal zones there will be double tops, bottoms, head&shoulders. Try to learn them and practice to recognize them because it will be easier for you in future, helping you to know where the price will go. There are a lot of tutorials about chart patterns on the internet.
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An aggresive fall in the last hours. Let's see how the market reacts here, at around 6500-6600 area of support.
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Next time about Fibonacci.
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Fibonacci retracement is a very powerfull trading tool. You want to use that, include it into your trading strategy. First thing that you do is to look for the price action and as soon as you see a reversal you check the retracement levels. Let’s say for example there is a downtrend which reverses: you put the Fibonacci tool from the beginning of the bearish trend all the way down to the end including the wicks. The most important level is 0.618 area of price. Golden ration of Fibonacci. Almost all the time something happens around Fibonacci zones; even if there isn’t a reversal, there will be a correction. Usually corrections happen around Fibonacci levels. Use it correctly and you will be able to predict where could be the next correction.
Last but not least there are candlesticks patterns. Keep in mind that you should not take them into consideration anytime you see a candlestick pattern, instead those patters are very powerful when you recognize them around trendlines or support/resistance zones. There you should look for them. Keep in mind that you have to practice a lot to make experience, and in time could be very easy.