One of the most undervalued concept in trading is the notion of support/resistance. We have plenty of support/resistances, we can draw horizontal or diagonal lines (and patterns), we can use moving averages and so on. Nevertheless, many traders keep “ignoring them”.
The simple reason for that is because they keep trading/investing in the belief this support/resistance will break. Why? Because it’s well known that each support eventually will turn into a resistance and vice-versa. First of all, each individual is different. Some like to trade in counter trend and some will follow the trend. Knowing what type of investors/trader you’re is the first step to build a strategy based on that behaviour.
For instance in the following example (considering a mid/long term investor, more than 3 years) a counter trend investor may buy on “A” (also considering the long term trend as Bullish) and a trend investor will wait for a definitive trend and may buy on “B”. Both choices make sense if you have a proper risk management and if you keep aware of the market cycles. Cryptocurrencies are very volatile and speculative, if you don’t follow a strategy, diversifying and investing gradually, you will lose money for sure.
Conclusion & Recommendations
- Never forget the big picture (weekly/monthly charts)
- Invest/trade avoiding emotions
- Follow a strategy
- Keep in mind your risk managment
- Keep learning