Trends play an important role in trading, giving traders a chance to use patterns in the price data to make decisions based on more than simple rises and falls, or worse, gut instinct. But how does one identify and draw a trend on a chart?
We just had to share this great article with our fellow PiMPs. Enjoy!
While trends can be useful, it is not advised to use them as the only factor in any entry decision. Even if prices touch the lower trend line of an uptrend and buying into bitcoin seems to make perfect sense, always look for more confirmation from other indicators (eg: other support and resistance key levels, volume analysis, price action patterns) that this trend is not going to break and losing you money.
Ideally, you want to have confluence of more than one indicator to increase the odds in favour of a profitable trade.
Furthermore, don’t forget to always look for higher and lower time frame trends. While it may seem like prices are in an uptrend on one time frame, higher time frames may reveal prices are actually in a downtrend, for instance. Many traders are not comfortable trading against the trend, which is why they rather trade true to the motto ‘the trend is your friend’.
Check out the entire article from our friends at CoinDesk for a quick look at some Bitcoin Price chart strategies!