Technical Analysis Quick Start Series: Basic Indicators to Understand Before Making Money

In the previous article, we mentioned some tools and methods for discovering and tracking smart money in cryptocurrencies. Then some friends commented that they didn't want to take shortcuts and wanted to seriously learn some technical analysis. However, after searching on Google, they found that there seemed to be too much content to learn. Is there a relatively simple quick-start tutorial for technical analysis?

In fact, we have previously organized some content on technical analysis, but it has been scattered across different articles. We have not compiled a systematic and complete tutorial (nor do we have plans to do so). However, considering that some friends are confused in this area, today we will provide a simple share on the topic of technical analysis. We will only list some commonly used basic indicators, hoping that everyone can use this as a foundation for expansion and further self-improvement using Google.

1. Support and Resistance Levels

Prices are mainly driven by demand. As market demand concentrates, a downtrend may maintain balance at a relatively fixed position. If the price bounces back multiple times from a certain level, we can consider this level as a support level. Generally, if you are trading in swings, you can consider buying when the price approaches the support level, as shown in the figure below.

Conversely, during an uptrend, the price will also try to find a new high. If the price reaches a certain level multiple times but fails to break through, this level is considered a resistance level. Typically, if you are trading in swings, you can consider selling when the price approaches the resistance level.

Support and resistance levels are relative; sometimes, if a resistance level is effectively broken, it will become a new support level. Similarly, if a support level is broken, it may become a new resistance level. As shown in the figure below.

In actual charts, we often see box patterns or flag patterns composed of support and resistance levels. As shown in the figure below.

Here we take SOL as an example for a simple demonstration, as shown in the figure below.

Based on different patterns, we can determine the corresponding trends, including uptrends, downtrends, and sideways consolidation (no trend state). As shown in the figure below.

2. Common Pattern Interpretations

On the basis of support and resistance levels, in addition to box patterns and flag patterns, we can derive different other patterns. As shown in the figure below.

Here we randomly take a few patterns from the above to explain:

Head and Shoulders Top: The time for the two shoulders must be symmetrical, and the target price is the vertical distance from the head to the neckline BD, with the downward target starting from point F ≥ CN. As shown in the figure below.

Head and Shoulders Bottom: The time for the two shoulders should be roughly equal. After the price breaks above the neckline, the upward distance should be ≥ CN. As shown in the figure below.

Double Top (also called M Top): Points A and C are flat, and the line drawn through point B parallel to AC is called the neckline. After breaking the neckline, a downward trend forms, with the downward target being the distance FB. As shown in the figure below.

Double Bottom (also called W Bottom): Points A and C are flat, and the line drawn through point B parallel to AC is called the neckline. After breaking the neckline, an upward trend forms, with the upward target being the distance FB. As shown in the figure below.

Ascending Triangle: Occurs in an uptrend, with the upward target being the widest part of the triangle. As shown in the figure below.

Descending Triangle: Occurs in a downtrend, with the downward target being the widest part of the triangle. As shown in the figure below.

For more patterns, interested friends can directly search for the corresponding names on Google to find more detailed information. In general, as long as you understand the basic patterns mentioned above, you can basically read candlestick charts.

3. Common Indicator Interpretations

In addition to the various patterns of candlesticks in the chart, there are also many auxiliary indicators. These indicators are very helpful in analyzing trends, identifying entry and exit points, and gauging market sentiment during trading. They provide objective data to reduce emotional trading and improve the accuracy of price predictions. As shown in the figure below.

Here we randomly list a few commonly used chart indicators:

RSI (Relative Strength Index): This indicator is mainly used to measure the speed and change of price movements. Generally, an RSI above 70 indicates overbought conditions (potential sell), while an RSI below 30 indicates oversold conditions (potential buy). As shown in the figure below.

MA (Moving Average): This indicator is a trend-following indicator that smooths price data, typically using the 50-day (short-term) and 200-day (long-term) MA. When the short-term moving average crosses above the long-term moving average, a bullish signal appears, while a cross below indicates a bearish signal. As shown in the figure below.

BOLL (Bollinger Bands): This indicator mainly provides insights into volatility to identify overbought or oversold conditions. If the price touches the lower band, it indicates a potential buy. If the price touches the upper band, it indicates a potential sell. As shown in the figure below.

For more chart indicators, interested friends can directly search for the corresponding names on TradingView.

Additionally, candlestick charts are analyzed based on multiple time frames. For example, if you prefer to trade multiple times within a day, you might consider looking at short-term charts (like 5m, 15m charts). If your trading frequency is not that high, you might consider looking at 4H or 1D charts.

In summary, if you enjoy swing trading, the technical indicators mentioned above may be quite helpful. When executing trades, it is advisable to set stop-loss and take-profit levels, such as setting the stop-loss target of the trading bot below the buying support level, while avoiding excessive greed.

However, if you are a long-term investor, I would actually suggest that you look less at candlesticks and directly refer to long-term indicators such as AHR999, Rainbow Price Chart, and MVRV Ratio (MVRV Z-Score) for your operations. As shown in the figure below.

At the end of this article, let's take a look at some recent news that is worth paying attention to:

On July 3, it was reported that Bittensor was hacked, leading to a halt in on-chain transactions. As a result of this incident, the price of the TAO token also experienced a significant drop in the short term. As shown in the figure below.

On July 2, Circle obtained the first EU MiCA license, becoming the world's first stablecoin issuer compliant with MiCA regulations. This means that the company's US dollar stablecoin (USDC) and euro stablecoin (EURC) are now compliant with the newly launched EU stablecoin regulations MiCA. MiCA is the first cryptocurrency regulatory framework in the EU and the world. As shown in the figure below.

On July 1, data showed that Polkadot spent 11 million DOT (worth 86 million USD) in the past six months, of which 37 million USD was used for promotion (advertising or paying influencers). However, Polkadot still seems to have not gained much attention on X and elsewhere. Currently, Polkadot controls 245 million USD (38 million DOT) in assets across three different chains, of which 188 million USD (29 million DOT) are liquid assets. Some netizens calculated that at Polkadot's current rate of burning money, they would go bankrupt in less than two years. As shown in the figure below.

On July 1, Amber Japan officially changed its name to S.BLOX, indicating that Sony plans to restart Whalefin and launch a cryptocurrency exchange in Japan. Sony's Quetta Web acquired Amber Japan (Whalefin) in August 2023. As shown in the figure below.

On July 1, according to monitoring data from Lookonchain, the German government transferred 1,500 BTC (approximately 95 million USD) and currently holds 44,692 BTC. As shown in the figure below.

On July 1, Gemini (a digital asset trading and custody service company) signed a five-year Bitcoin sponsorship agreement with Peter McCormack's football club. As shown in the figure below.

This concludes our content for this issue, which is also the 479th article updated by Huali Huawai. For data references and image sources mentioned in the main text, please refer to the corresponding date articles on Huali Huawai's Notion.

Disclaimer: The above content is merely personal opinions and analyses, intended for learning records and communication purposes only, and does not constitute any investment advice. The cryptocurrency field is a high-risk market; in addition to various forms of scams and Ponzi schemes, many projects also carry the risk of going to zero at any time. Please view it rationally, enhance risk awareness, and avoid engaging in things you do not understand.