Hey,
and welcome back to another installment
of the Luno trading series.
It's been a good run so far,
and last episode, we looked at the difference
between technical and fundamental analysis.
If you haven't seen it yet,
make sure you catch up just over here.
Okay.
So this time we're going to be covering
the different types of charts.
A key aspect if you're going to be making your trades.
Today, we'll look at line charts, candlestick charts,
and of course, depth charts.
We'll also take a look at what's going on
on the charts themselves,
trend lines and the basics
behind the support and resistance line.
Let's start by taking a look at the features
we can use with trading view.
This has recently been added to the Luno exchange,
and is a really powerful tool.
Here you'll see there are a lot of different tools
that we can use.
You can select your timeframe this week, like this,
and switch between different charts
by clicking on the chart icon and toggling here.
You can also draw some basic trend lines, like so.
Okay, we've got our chart.
Ready?
Let's jump into the detail.
First up, let's go over the most familiar crypto chart,
a line chart.
These show us historical price points over time.
Whether we want to see minutes, days, weeks, or years,
the chart will show daily closing prices
during that time period.
The timeframe that you look up will depend on
the trading strategy that you're using,
as we talked about in episode two.
Linear line charts divide the price scale
into equal pieces, while the log chart
scales the price according to percentage change.
You can easily switch between the linear or log scale
by clicking on log at the bottom.
Below the line chart,
you have the volume in bars.
The main thing to note is that the linear charts
show the speed of price changes best,
while log charts make it easier to identify trends.
Now, let's move on to something a bit more interesting.
Candlestick charts.
Traders tend to use candlestick charts,
as they're easier to see price patterns
in a single glance with lots more info.
One of the first things that we need to note
is that candlestick charts are green and red candles.
These candles have lots of different information,
and the green candles show that the asset, like Bitcoin,
closed at a higher price than it opened
in that certain timeframe.
The red candles, however, show the opposite.
The price closed lower than it opened.
Candles measure a set amount of time.
And this can be anywhere, from seconds to years.
There are four parts to each candle
on the candlestick chart.
Each candle has a body and two wicks,
the upper and lower wick.
The top of the body marks the first recorded trading price
at the open,
and the upper wick or the top is the high or highest
recording trading price in that session.
Then there's the bottom of the body,
that shows us the lowest recorded trading price.
And finally, the lower wick, at the bottom,
that shows the last recorded price at the close.
Generally, the longer the body of the candle stick,
the more intense buying and selling was
during that timeframe.
If the wicks are short,
it means that the high or the low
happened close to the opening and or closing price.
And of course the opposite is true of long wicks.
The candles give us an idea of how volatile the market is.
If we're looking at the candles from a TA perspective,
the more volatile the market is,
the higher the chance for gains or losses.
We'll come back to candlesticks charts later
to show you how to draw some trendlines.
But first, let's quickly cover depth charts
to get the depth chart,
just toggle from trading view at the top left hand corner,
The depth chart shows us all the market makers
who want to buy or sell an asset,
and the price they want to pay.
Left to right, we see the price.
The height of the graph shows us the amount of the asset.
The lines show how much of the asset
is needed to be bought or sold to reach a given price point,
the green on the left are the open buy orders,
and the red on the right are the open sell orders.
The open buy orders are below the current price,
While the open sell orders are above the current price.
At the center, where the two lines meet,
is the last traded price of that moment.
The depth chart shows us supply and demand at a glance,
and how deep the market is.
Traders look for signals in the curves
and the movements of these lines.
Another kind of line that we want to talk about
are trend lines.
Trend lines are diagonal lines drawn on charts
that connect specific data points.
They make it easier to see price movements
and market trends.
It's generally agreed that trend lines
should connect three or more points together
to be considered valid.
The main thing to know about trend lines
is where the points you connect are.
In an uptrend, you draw the lines
using the lowest values in the line chart.
So you go from below the candle.
And in a downtrend, you use the highest values,
so you go from the top.
Based on these highs and lows,
trend lines indicate supply and demand in the market.
A valid trend line must be tested several times
to show it's not just a coincidence or a price fluctuation.
When we extend trend lines into the future
using moving averages,
they act as a line of resistance, or support,
depending on whether they are at the bottom
or the top.
Support is when a downtrend is expected to pause
because there's a concentration of demand.
This is the trend line that we draw at the bottom.
Resistance is when an uptrend is expected to
pause temporarily because of the concentration of supply.
This is the line we draw at the top.
There's a lot more to be said on trend lines,
but this gives you an idea of how they can be used.
Okay!
And that's a wrap for this episode.
The best way to become a pro at trading is
to constantly try different strategies
and practice on the Luno exchange,
using trading view and getting your eye in on the charts.
Don't forget to smash that subscribe button
so we can keep bringing you that crypto knowledge.
But until then, and as always,
#ToTheMoon.