Trading: Basic Technical Analysis

In the last blog post, I explained the process I go through to identify the coins that I trade. In this post, I’ll be going over how I filter those down to only coins that have a favorable chart. To do this, you’ll need an account with TradingView and Coinigy.

To give you a visual, I’ll be walking you through one of my recent trades. Recently, I found a coin called ClearPoll (POLL). The reason I identified it as being a potential buy was because it had a mobile app release on December 29th, and is scheduled for a platform release on January 17th. I also did some basic research on the fundamentals of the coin. It has a very low supply–only 7 million coins if I remember correctly. The project also has a devoted and active developer team and a loyal following from their community. About a week before the app release, I bought a small amount of these coins (I tend to go lighter on coins that are less well known). After determining that that POLL would be a good candidate for decent accumulation due to upcoming catalysts, I began to look at the chart.

The first thing I do when I pull up a chart is set the timeframe to 4 hours. This means that each candlestick will represent 4 hours of time. A candlestick are the bars on the chart that show you which way the price is moving. If a candlestick is red, that means the price moved down during that timeframe. If it is green, the price increased. After I set the timeframe to 4 hours, I zoom the chart out to get a good overview of what the price has done in the past few weeks. This is useful for spotting large trends and also identifying an all-time-high or low.

Next, I draw very basic support and resistance lines. Basically the goal of this is to draw a line along the bottom of the chart, connecting as many candles as you can to establish a trend. You do the same along the top. You should also draw lines on smaller timeframes. Don’t worry if you’re confused, I’ll attach a couple examples at the end of this post.

After I have some lines drawn, I apply only one indicator to the chart: Stochastic RSI. This is an indicator that helps you tell if the coin is overbought or oversold. It’s very helpful for understanding the ebbs and flows of the market. An RSI under 20 means that the coin is oversold, and an RSI over 80 means that it is being overbought. For short-term day trading, you should pay attention to both the 4 hour and 1 hour RSI levels. For longer-term swing trading, you’ll want to trade according to the 4 hour and 1 day RSI levels.

When I looked at the POLL chart, I spotted that the price was near a long term support line, and the 4 hour and 1 day RSI was near the floor. I also knew that they had two big releases coming up within the next month. It was a perfect setup. I added to my position and waited.

pollchart

In the chart above, the yellow circles represent where I purchased this coin. As you can see, as of today I am 80% up on this trade. I would have sold after the app release, but the app got great feedback and drove the price even higher. Since the market sentiment of this coin is really positive, I’m going to continue to hold it until the platform release on the 17th. If we break top resistance in the rising channel, the price could really fly. If we get rejected at the top resistance, I’ll be looking to possibly exit my position.

This was a very clear-cut trade and an easy one to pull the trigger on for me. Not every trade will be so easy, but I wanted to give you guys an idea of what it looks like when everything aligns just right.

In my next post, I’m going to explain how to properly enter a position. This is incredibly important. This is the kind of stuff that separates good traders from sloppy ones. Getting good entries and exits on your trades will ensure that you don’t leave any profit on the table. As always, if you have any questions please don’t hesitate to ask me via social media or the contact form on this site.

In this post, I mentioned some services that I use: TradingView and Coinigy. I have talked about needing these accounts in the past. You can find links to almost every tool I use as a trader on the “Links” page. Using charts is extremely important, so having accounts with those websites will be crucial to your success in trading.