We learn anticipation and reflection during our time here on Earth. We anticipate, for instance, our arrival home following the end of a long day. Sometimes, we will reflect upon the day's activities to determine if we can improve our results so that if we repeated them tomorrow, better outcomes would arise.
In the world of financial trading or anything else, technical analysis is key to understanding a behavior pattern to plan for better results in the future.
Welcome fellow Hivians to our next discussion on finance. This segment will discuss technical analysis related to charts and how to read them with some understanding. Well, at least at an understanding of a beginner like me.
Chart Analysis Overview
My Basic Understanding
My knowledge of chart patterns was limited to understanding that if the line trend moves upward, then the stock, coin, or token price rises. Contrarily, if the trend moves down, then the value of what I hold becomes less.
If the trend moves up, I felt I had the following options:
- Hold the token and retain the new value hoping that value doesn't fall in the future and, instead, will rise even higher
- Sell the token for a profit, assuming the selling price is greater than the purchase price.
- Swap a portion, or entirety, of the LEO token for another.
If the trend moves down, I felt I had the following options:
- Sell the token to avoid significant losses
- Sell the token at a predetermined setpoint to capture the gains predicted.
- Sell the token at a higher value for another desirable product at a higher volume.
- Hold the value of the token with the hopes that value will rise to greater heights
It pretty much sums up my knowledge at the time before participating in Leo Finances.
Trends are important to give you an understanding of how something changes over time. Common plotting from trends comes in the form of line or candlestick graphs.
The trends above represent graphs of two different currencies. On the left, you have a line chart generated through Coinbase for the currency XRP. On the right, you have a candlestick graph generated by Leo Dex for the Leo currency. While you can glean some information from the line chart, the candlestick graph provides more information.
History credits the development of the candlestick graph to Munehisa Homma. Munehisa Homma (1724-1803) was a rice trader in Sakata City, Yagamata, Japan. He developed a form of the candlestick chart graphs we know today to predict supply and demand for rice trading. In his book entitled, Fountain of Gold - The Three Monkey Record of Money, Homma described his observation of the rice futures market as having bearish and bullish behavior.
Homma found that he could discern the market's psychology by observing the changing prices of rice trading. Utilizing his observations provided him with an advantage in the market that earned him great fortune and an honorary Samurai title within Japanese society.
We can see examples of how the emotional state of the market affects cryptocurrency or stock prices today. XRP's recent plummet following an announcement of an SEC lawsuit serves as an example.
I found myself in Leo Dex during my first active participation in Leo Finance. I expected to see line graphs, but instead, the candlesticks comprised the currency trend. At the onset, I learned that candlesticks had so much more information than what I was used to seeing.
Each candlestick represents a period of time. The period of time can range from seconds, if the platform supports, to days and beyond. Each trader chooses their period of time-based on their trading habits.
Each candlestick also provides data when the trading period, based upon the time frame view, opens or closes along with the highest and lowest prices of the currency during the applicable period. The lines outside of the candlestick box are called shadows and represent the highest and lowest prices of that currency.
Whether or not the candle is filled or a different color depends on the type of trend during the observed time frame.
Bearish or Bullish Trends
The two primary colors you'll notice on Leo Dex's candlestick bodies are green and red. Each color represents its only type of trend during the trading period.
Bull trends arise when the price of a currency or stock is "rising or expects to rise" according to Investopedia. Conversely, Investopedia tells us that bear trends come about when a currency or stock price "lowers or is expected to lower".
Not all trading platforms will display all cryptocurrencies. If you're searching for Bitcoin, then you'll have your choice in virtually any trading service. Altcoins, or anything that isn't Bitcoin, won't be supported as widely. You'll have to do your own research to match a platform with your desired currency.
Taking the Dive
Investing your money is a daunting task. I've learned the hard way, outside investing, that it's better to keep your head down when you first start something new. I'm taking the time I feel is needed to learn the right way of things before taking on trading more frequently. For now, I have the Leo Community and their vast lessons to speed me through to the level I need to reach.
Image by Gerd Altmann from Pixabay
Thank you for joining me on my continuing journey through Leo Finance. We didn't cover more advanced features, but my lack of understanding limits the amount of time I can dedicate for now.
Subsequent articles in this series will cover trading practices like Fibonacci sequences, Multi-Time Frame Analyses, and Elliot Wave applications. Afterward, we will compare historical performance to see if what I've written about actually applies to what's occurred. At least, I hope to succeed in explaining these things correctly and clearly.
How do you feel about the information presented today? Do you have any advice or stories to share? Comments, compliments, and criticisms are always welcome. Please share it with us in the comments below!
If you have the time, you might want to read through some of @ScaredyCatGuide and @rollandthomas articles. Their work has been beneficial to me in shaping how I write for Leo Finance. They're a bit above my operating level, but it's harder to see where you need to go if you don't watch how the more experienced guys do it.
Posted Using LeoFinance Beta