To inexperienced people, trading can be a complicated and complex task. While continuously performing positive trades requires skill and a lot of time, getting started in trading is definitely not as hard as you might think. After you know the fundamentals of trading, it’s not difficult to find potential trading opportunities.
Here are four important elements which will help you to identify your next beneficial trade setup.
One of the most important indicators for evaluating new trading opportunities is the momentum. It is like a current that flows through the market, pushing it in a direction with enormous pressure.
Momentum can be determined by studying the general trading volume and the prevailing market sentiment. If prices of one or more assets are moving either up or down with exceptionally high volume, the current momentum is very strong. In addition, by investigating personal feelings of market participants about the future development of a market, you can also get a picture of the current market sentiment.
In such cases, you can usually expect the current trend to continue. This gives you a nice and safe opportunity to enter a trade; but remember, the trend is your friend.
Trading based on the news is a popular strategy amongst many cryptocurrency traders. By searching for upcoming events in the space, you can get a precious advantage over your competitors. The trick here is to enter a trade before the public is aware of the upcoming event. When the momentum is very bullish, news will have an extraordinary impact on the price of cryptocurrencies. However, if you find yourself in a bearish market, you have to be extremely cautious.
It is no rarity that news may have no impact at all in a general market downtrend; you should always assess the current momentum before engaging in trades that are based on news.
Supports & Resistances
Supports and resistances are probably the most significant tool for basic chart analysis. Seldom have we seen traders who are not operating their trades based on these important zones.
Once a price reaches a critical support or resistance, you will undoubtedly come across a nice trading opportunity. In the best case scenario, the price might even perform a bounce, resulting in a chance to make some money very quickly. Nonetheless, planning your risk management is key to perform ongoing positive trades.
For advanced traders, technical indicators can be quite interesting tools to find advantageous trade setups. They can give you an insight into the actual momentum and possible zones of interest.
The analysis of candlesticks, the relative strength index (RSI), and the stochastic RSI might be some of the most common technical analysis components. All of them project a more or less detailed outlook of the momentum, supports, and resistances.
After acquiring the skills to use these indicators, you will find more trading opportunities in the future. Check out our weekly Technical Analysis every Monday to see examples of these indicators.
As you can see, getting started with trading is a feasible task once you know the relevant aspects. Still, experience is much more valuable than simply knowing the rules. With every set up you choose, with every trade you close, you will become a better trader.