Bitcoin abc development upholding values and achieving the mission
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The price movements are also nothing new and shouldn't deter you from investing in Bitcoin for the long run. If you believe in Bitcoin's fundamentals, it may be better not to worry and just buy and hold for the long run. Buying and holding, accumulating and dollar-cost averaging are probably the best strategies for most people, especially for those without a lot of time. For us speculators, one of the methods people use to try to predict price movements is called technical analysis.
Technical analysis is simply a method of trying to predict future price movements simply by looking at past prices. Most academics and finance professionals subscribe to efficient market theory and it would be hard to argue against them since there are only a handful of cases of those who have used technical analysis with great success.
To be fair very few consistently outperform the average using fundamental analysis and efficient market theory applies to fundamental analysis in the same way. Yet fundamental analysis has a much better reputation.
Professionals associate technical analysis more with witchcraft or voodoo magic. So I wanted to do a blog series on technical analysis to cover some of the most common indicators and strategies and hopefully give those that are open-minded an edge in their trading. The first basic concepts I wanted to discuss are support and resistance levels. A resistance level is a price ceiling that people believe to be difficult for an asset price to go above.
A support level is a price floor that people believe will be difficult for an asset price to go below. Oftentimes an asset achieves an all-time high price due to some fundamental news or irrational exuberance and subsequently falls significantly. The all-time high price creates a level of resistance that is difficult to surpass unless there is more exuberance, fundamental drivers or broader interest than what took the price up to a previous high before. When an asset price breaks above an all-time high, that all-time high price becomes a support level that future prices should stay above in a general uptrend.
On the other hand when an asset price breaks sharply below longer term lows ie. Right now Bitcoin is at its all-time high. When prices broke above the previous all-time high resistance level that was likely a good signal that another Bitcoin boom was coming.
However it broke down below the new support level ie. In just a month Bitcoin prices crept back up over the resistance level, suggesting the ETF news was not that significant overall. Above is a Bitcoin chart for that shows shorter term resistance and support levels. That may be a huge relief to the Bitcoin community. Will that be enough? I don't think so, but I'll change my tune if Bitcoin breaks all-time highs with some good strength.
The reason I made that statement was precisely because I favor using resistance levels and breakouts during large moves such as the one Bitcoin currently is in. When prices break through resistance levels to new all-time highs you can get in early and ride the move upward.
For safety you can also set up stop-losses below previous all-time highs because previous resistance levels turn into support levels. Keep your stop losses below significant support levels and might as well ride the wave to see where this goes right?