Bitcoin is a decentralized digital currency. It was created in 2009 following the release of a white paper by “Satoshi Nakamoto”, an unknown figure. Unlike fiat currencies (like the dollar, or euro), Bitcoin is created, distributed, traded, and transactions are stored with the use of a decentralized ledger system: a blockchain. Since the launch of Bitcoin, lots of other cryptocurrencies have launched, such as Ethereum.
Glossary
Coins
BTC: the trading abbreviation for Bitcoin
ETH: the trading abbreviation for Ethereum
Trading/Price Terms
SL: Stop-loss is an advance order to sell an asset when it reaches a particular price point. It is used to limit loss or gain in a trade.
TP: A Take Profit is an instruction to close a trade at a specific rate if the market rises.
EMA: An exponential moving average. This is a type of moving average (MA) that places a greater weight and significance on the most recent data points. The exponential moving average is also referred to as the exponentially weighted moving average.
Tenkan-Sen (or Conversion Line): the mid-point of the highest and lowest prices of an asset over the last nine periods.
Kijun-sen: the midpoint price of the last 26-periods. It is an indicator of short- to medium-term price momentum.
Ichimoku Cloud: a collection of technical indicators that show support and resistance levels, as well as momentum and trend direction. It can also be used to forecast where the price may find support or resistance in the future.
Major support and resistance areas: price levels that have recently caused a trend reversal. If the price of an asset is trending higher and then reverses into a downtrend, the price where the reversal started is called a strong resistance level. Where a downtrend ends and an uptrend begins is a strong support level.
Symmetrical triangle: a symmetrical triangle on a chart is when the upper and lower price points converge, creating what looks like a triangle on its side. This is a period of consolidation before the price of the asset is forced to breakout or breakdown. A breakout from the upper trendline is the start of a new bullish trend. A breakdown from the lower trendline is the start of a new bearish trend.
Calculating Pivots
There are several formulas to evaluate support and resistance pivot points between currencies, such as between USD and BTC. These values can be tracked over time to work out the probability of prices moving past certain levels. The first step uses the previous day’s prices:
Pivot Point for Current = High (previous) + Low (previous) + Close (previous) / 3
The pivot point can then be used to calculate estimated support and resistance for the current trading day.
Resistance 1 = (2 x Pivot Point) – Low (previous period)
Support 1 = (2 x Pivot Point) – High (previous period)
Resistance 2 = (Pivot Point – Support 1) + Resistance 1
Support 2 = Pivot Point – (Resistance 1 – Support 1)
Resistance 3 = (Pivot Point – Support 2) + Resistance 2
Support 3 = Pivot Point – (Resistance 2 – Support 2)
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