How to Identify and Use Crypto Trading Trends Effectively

It is crucial to identify trends as early as possible when they begin. To do this, we need to examine the market structure.

An uptrend will start when HH and HL are formed on the chart, while a downtrend will start when LL and LH are formed on the chart.

HL means “Higher Low”, and LL means “Lower low”.
HH means “Higher High”, and LH means “Lower High”

Trends are fractals, the patterns repeat themselves regardless of the time period considered.
The long term trends are affected by the next shorter time trend (indeed, the shorter time frame trends often give an early warning about longer trends)
The definition of a trend is simply the direction that the Price of an asset is going to follow. We need to understand that the “trend” indicates a direction of the Price. It is not a line that the Price follows.
When the trend is not clear, that is, neither down nor up, and it moves between support and resistance, that area is called trading range

Trading Range

We will be in a trading range when the new peaks and low points of the prices are at approximately at the same height as the prior peaks and points of the previous lows.
Trading ranges usually occur after a very long uptrend or downtrend comes to a temporary standstill. In fact, “trading ranges” are also called “consolidation zones” or a “congestion area”.
The trading range is characterized by prices staying in a specific range over time. The price of the asset tends to fluctuate between support and resistance.
A “trading range” or transaction area is an area where both the resistance zone and the support are relatively close and the price oscillates between them until, at some moment, momentum will break one of those zones.

This raises two possible strategies:

• Make transactions within the “trading range”.
• Carry out transactions when the break occurs

We will search for entries at the bottom of that trading range (at support), in order to sell at resistance. Indicators will help us to know when the price is overbought or oversold in that trading range, indicators we will use for that:

• Relative Strength Index (RSI)
• MACD

Check out the post about those trade indicators here

Post Sources

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