Using Support and Resistance Levels To Know When To Buy Bitcoin | Maximize Your Investments Entries

There are a lot of scenarios and tools to take into consideration when investing in crypto, or even stocks. Still, one essential tool that has continuously helped me scan through the market for the best opportunities has been support and resistance levels.

This is a beginner-friendly introduction to technical analysis (TA) to help you understand what are support and resistance levels, and how to chart them and use them in your favor.

Support level

The support level represents a price point that an asset struggles to fall below over a given time period.

Let’s use this Bitcoin chart as an example

A support level becomes valid when there are more than 3 touches around that price level. I highlighted in purple each time the price touches a support level.

As seen on the chart above, the $28,600 is a support level because Bitcoin bounced several times off that level.

Under it, there is a second level which is $20,000. With 3 touches. Realize that there is also a spike in volume when the price is close to that level.

The more touches and the more volume there is around a level the stronger it is.

Support levels can also become resistance levels. Right now Bitcoin is at $20,000, under the previous $28,600 support level. That means the new resistance is $28,600 while the support is $20,000.

How to use a support level in your favor

Support levels are often used in trading but for the sake of this article, I will focus on investing. Let’s say you have $1,000 to invest into BTC when do you think is the best time to buy?

When it is trying to go above the $28,000 level or when it is bouncing off the $20,000?

The best option will always be buying at support. The likelihood of Bitcoin trying to go above $28,000, failing, and going back to $20,000 is high.

So it is always good to wait for a retracement and buy at $20,000 knowing that there is a strong support holding the price above that level.

What would happen if Bitcoin goes above $28,000?

We call that a breakout because it is breaking previous resistance. If it is able to hold above that price. That resistance becomes the new support level.

Resistance levels

The resistance level is the price at which the price of an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price.

A resistance level represents a price point that an asset has had trouble exceeding in the time period being considered.

Look at the yellow circle representing the resistance level at $41,900. Touching it a few times a retracing back to the previous level of support of $28,600.

Note that support is there to help you know when there is more buying/selling action taking place. Don’t base all your investment strategy around it.

Levels are not 100% accurate, we use them as ranges. For example, you might have your resistance level between $49,700 to $50,500.

You might be asking yourself what if there are no more resistance levels above that price? What if Bitcoin breaks out into new all-time highs and there is no previous price action to chart, then we call that uncharted area.

Uncharted refers to something not recorded on a map. Uncharted waters or uncharted territory can refer literally to places not yet explored, but it can also be used figuratively to refer to unfamiliar situations in general.

A very useful strategy to use is the psychological key levels.

Psychological key levels

Psychological support and resistance consistently work because of fundamental human disposition. Human beings value simplicity; from a trading perspective, this means valuing whole numbers.

Let’s say you want to buy a car and you are setting a budget for it. Usually, we don’t say I will allow myself to spend $10,376 on it. No, we usually use round numbers like $10,000.

Think about the last time you asked for a raise. We rarely say “I want a 9.54% increase in my salary”.

Round numbers work because most other traders/investors are also human beings and just like you they are looking for the next round number. Bitcoin at $30,000 / $50,000 / $100,000.

So next time you see yourself in an uncharted area or you cannot find a close support/resistance level, think about using a psychological key level.

As always, thank you for reading. Check out some of my stuff:

📊 My Spreadsheet: https://defichronicles.gumroad.com/l/xwwln

😎 Coolest Crypto Merchandise: https://defichronicles.sellfy.store

📸 Youtube: https://www.youtube.com/channel/UCnWRp0bDwHZNu_wY8Z4qxFA/videos

👩‍🚀 Socials:

If there is any way that I can help you, feel free to reach out;

Twitter: https://twitter.com/DeFiChronicles

Email: thedefichronicles@gmail.com

🤝 Referrals & Discounts:

Lofty: Invest in Real Estate through crypto and get $25 for FREE. https://www.lofty.ai/refer?grsf=1q1yh8

Binance: https://www.binance.com/en/activity/referral-entry/CPA?fromActivityPage=true&ref=CPA_00DQAVWI13

Spring Game: Use Creator Code ‘DEFICHRONICLES’ for 2% off.

VaporNodes: https://app.vapornodes.finance/nodes?invite=0x43dc5E8C988c3563db3d6C16243F5Eb4C15058A7

Disclaimer: This is not financial advice, I am just a guy with a laptop sharing his opinions and experience. This is for entertainment purposes only. Always Do your own research before investing.