Every year millions of people try their luck in trading in the hope of making a living out of it and leave their regular 9 to 5 jobs. The reality is that most of them fail, not because trading is difficult but because they complicate it unnecessarily.
Today, I am gonna teach you some really simple things that will increase your swing trades accuracy.
Keep reading till the end and if you think it was helpful give me a shoutout on twitter and share it with your friends and social groups.
The most common mistake every new trader makes is that he/she tries very hard to find a perfect indicator and goes through hundreds of them losing capital along the way before realizing the fact that no Indicator is 100% correct and the most basic Indicators that he/she knew on day one are the most beneficial one.
Support and Resistance Zones
Support Zone is a zone from where an asset keeps on bouncing back or doesn’t cross it downwards.
Resistance Zone is a zone from where an asset keeps on retracing or an area asset is unable to cross upwards.
In the above BTC/USDT pair, we can see that bull run started in September 2017 and formed a weak support for a few weeks at $12,500 mark but once it broke that, next support was found at $3,500 that is the same price from where bull run began and that is a complete cycle.
Once a support is broken, it becomes resistance and vice-versa, once the resistance is broken it becomes a support.
Look at the graph and it clearly shows this, $12,500 level which acted as a weak support in 2017 flipped as a strong resistance and only when it was broken in August 2020 that the bull run started and Bitcoin made a new all time high of $42,000.
Tip: Draw clear Support/Resistance zones on your chart. Buy at Support and Sell at resistance.
Relative Strength Index (RSI)
It is one of the most talked indicators out there and perhaps also the most misunderstood indicator. Many think that Buy when RSI is oversold and Sell when RSI is overbought, Simple right? No.
Because if we look at the most recent portion on the above chart, RSI is in overbought territory since August and any trader going by this mantra would have missed the complete bull run.
So how do you use it? One way to use it is by making trend lines on RSI and it will be a lot simpler to understand from where the prices are gonna bounce back or retrace. Usually prices retrace at the third time of testing the upper trend line.
Another thing to look out in RSI is Bullish and Bearish divergence.
If the price of an asset is rising but RSI is making lower highs then it is called bearish divergence and a sign that prices are gonna fall sooner than later.
Whereas, If a price of an asset is going down but RSI starts making higher lows than it is called bullish divergence and a sign that prices are gonna go up in near future.
Moving Average (MA)
Moving Averages are another very famous Indicator. Let me tell you a very simple way to trade using moving averages. Make 3 MA’s on your chart (10 day MA, 20 day MA, 50 day MA), when 10 day MA crosses 20 day and 50 day MA in the upward direction and at the same time 20 day MA also breaks above 50 day MA it is a bullish signal and prices are likely to go up.
I’ve marked this pattern on the above chart for you to see.
That’s all from my side. These were the 3 very common, simple and very efficient ways to trade. If you follow these things, you won’t be requiring any other indicators and the accuracy of swing trades could be increased by 70%-80%.
Keep your emotions out of it and don’t go around chasing green candles, let the trade come to your support/resistance zones and only then open a trade.
Note: I am not a financial advisor and this article is only for education purposes. BrushUpCrypto.com will not be responsible for any failed trade or incurred losses.