In this episode, Indodax Academy will teach you how to read trend line and indicators. The function of the trend line is as a support or resistance line.
The function of the trend line is as a support or resistance line
There are 2 methods that can be used to find support and resistance on a digital asset chart. The first method you can find with visual observation is where you observe the area that is the peak and the valley in the price movement. Well, that area will be the price support and resistance.
After you understand the peaks and valleys of prices in the previous video, this time you will learn notice trend line and indicators. Then, we are going make a manual tool that will help you to see trends in price movements. This manual tool is called a trend line.
If these fellow peaks or fellow valleys are connected, then you will get a line. Well, this line is referred to as a trendline or trend line. The function of this line itself is as a support or resistance line. To get a resistance line, you just need to connect the existing peak points. For the support line, all you have to do is connect the dots on the chart.
Earlier I mentioned that there would be two methods. Apart from the visual observation method, there is a second method for finding support and resistance, namely indicators.
What an indicator is?
For those of you who are unfamiliar, an indicator is something that can provide clues or information in the analysis of price movements. Keep in mind that there are many indicators on a digital asset chart. However, each indicator has its own function.
Because there are so many indicators, I can’t explain everything. But this time, I will explain one of the most popular indicators among traders, the Moving Average.
What is a moving average?
Moving average is an indicator that displays the average price movement in a period. Moving Average can be abbreviated with the term MA. The manifestation of this indicator is a line and the MA period must have a variable, for example there are MA 5, 20 or 50. This variable can be chosen according to our needs. MA 5 displays the average price movement for 5 days, MA 20 displays for 20 days and so on.
This MA line can function as a support or resistance. If the MA line is below the candlestick, it will be read and function as support. If the MA line is above the candlestick, it is read and functions as resistance.
To show the moving average in the digital asset graph, you can get it by going to indodax.com, then clicking marketplace. Then click which digital assets you want to see, and we click advanced chart. Then click the indicator, many indicators will appear here, but we will use the moving average indicator. Then a blue line will appear indicating the moving average line. To change the Moving Average period, you can click format, then just write 5 for MA 5 days, 20 for MA 20 days or 50 for MA 50 days.
Are you still confused? Let’s take a look at an example of a graph of digital assets with different MAs.
Here we see this BTC / IDR chart with the Moving Average 5 indicator which shows trading for 5 days or 1 week. You can see that this line is very close to the candle. In the end, this MA line serves as resistance because it is positioned above the candlestick. The MA 5 level price is around 114,200,000 rupiah while the last candlestick price is 114,156,000 rupiah. To this end, are there any of you who are still confused? If not, let’s continue again.
Earlier we discussed about MA5, now we move to a bigger period, MA20. If MA5 shows a moving average for 5 days, then MA 20 shows trade for 20 days or 1 month. MA20 serves as resistance or support in price movements. When the price touches the MA 20 line, soon the price will bounce back. With an increasingly large period of visible MA lines that are not too sticky if we compare with MA 5 drawn earlier. The price of the MA level is around 113,810,000 rupiahs and it serves as support at the end. Meanwhile, the price of the last candlestick is around 113,816,000 rupiah.
Now we move on to an even bigger period of MA 50. This means the average price movement for 50 days. If we look at this chart, with an even greater period, the lines don’t stick with the candlestick anymore. If we compare with the MA 20 chart, it appears that the MA 50 line is less attached to the candlestick. At the end, the MA50 line is at the level of around 113,200,000 and the price of the last candlestick is at the level of 113,817,000. The MA 50 line functions as support.
From this video, I believe you have learned about Trend line and Indicators. In the next video, we will discuss topics that are even more interesting! Curious? Stay tuned with Indodax.