Potential Break through Resistance Line, BTCUSD

BTCUSD Market

Potential Break through Resistance Line, BTCUSD

B. Bands are narrowing close to the resistance zone . Bullish candle that breaks through the upper band and spike in volume could result in bullish price movement. On the other hand, if bearish candle breaks the lower band it could result in price decrease forming double top . 

This scenario should be watched closely!

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What is Bitcoin?

Bitcoin (BTC) is a cryptocurrency that appeared in circulation in 2009. It was created by Satoshi Nakamoto. Although, until today we do not know in 100% who this person is (or maybe it is a group of people). 

Anyway, Bitcoin is a specific currency that anyone can "mine" on their own hardware (usually some Graphic Cards with huge computing power). Bitcoins are divided into smaller units called satoshi (one bitcoin is 100,000,000 satoshi).

Storing this cryptocurrency is quite simple, because this coins are simply stored on the owner's personal computer in a special wallet or they can be stored in special portfolios, created on external websites. If we want to perform transactions via bitcoin, we simply "transfer" them from our portfolio to the portfolio of the second participant.

Bitcoins have been gaining in value since their creation. And in fact, no one knows how much the true value of it is. However, it must be admitted that Bitcoin currency is becoming more and more popular. Also the use of it is being accepted by increasing number of companies and even countries as a means of payment. 

Bitcoin's popularity is also related to another fact. It is not controlled by any bank or other type of financial institution, and its value is determined solely by the rules of demand and supply (although supply is limited here, as it will be possible to mint a maximum number of 21 million bitcoins).

Bitcoin is often said to be the currency of the underground world (mafia, gangs, etc.) because transactions can be carried out that are not controlled by any supervisory authorities. However, as data supports it, such transactions are just a margin, and the vast majority of transfers are "normal" payments, exchanges, etc.

What does the future of bitcoin look like?

Hard to say. Most people say that it has a bright future and that over time, it will replace the payment means we currently know. However, some specialists say that the currency will be devalued after a while, and those who have it will lose only the funds they have allocated for its purchase. The truth is surely somewhere in the middle and time will tell who side was more right

What do you think about Bitcoin? Let me know in the comments below!

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What is Ethereum?

Ethereum (ETH) is a cryptocurrency that was created in 2013 by Vitalik Buterin. In 2013, Vitalik came up with idea of ​​creating this currency after reading a study about Bitcoin. Often, it is said today that ethereum is bitcoin 2.0. Although at first glance, both cryptocurrencies operate on similar principles, they actually differ in a significant way.

In the case of Ethereum, we are dealing with a protocol that is based on a decentralized Blockchain, on which run applications (anyone can develop an application that runs on Ethereum). This platform has programmed functions called smart contracts, it cannot be broken and it protected from fraud.

This is the main reason why it was very enthusiastically received by the market. This project received 19 million dollars for its development!!!

The value of Ethereum is systematically growing, which results of many factors. First of all, the acceptance and availability of this cryptocurrency is growing. In addition, this project is constantly improved, which allows for even better use of this currency and its smart contracts. 

Read whitepaper
What are Smart contracts?

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What are Smart Contracts?

Ethereum Technology

The year 2015 was very important for blockchain and cryptocurrency technologies. It was at that time that Ethereum appeared on the market. Unlike Bitcoin, Ethereum's main task was to create a fully decentralized application platform for users.

In addition to modern technology and innovations that came with this new open-source platform, smart contract is "probably" the most important business solution of the future.

So, what is a Smart Contract?

As I have already mentioned, Ethereum's main goal is to provide users with a decentralized application platform. Where any developer can create his/her own decentralized app with smart contract. 

To understand how this system works, we must first understand the concept of smart contract. The idea of ​​this solution appeared in 1996 - more than 20 years ago, but only now we have the technical possibilities to apply it through Ethereum.

Smart contracts are used to enforce individual lines of code. In other words, if there is an event A, the reaction will be B. The key point here is that blockchain, or individual nodes on the blockchain would verify if that event A happened to process reaction B. This would get rid off intermediaries and reduce costs.

It is a very simple process that happens simultaneously in thousands of blockchains. Also due to the existing technology, smart contracts provide extremely powerful computing power and new possibilities for everyone.

The main idea of ​​smart contracts is to use blockchain technology not only to enforce a certain type of action, but also to automatically verify and facilitate it. These actions must be carried out automatically. When this condition is met, the system proceeds to the automated execution of transactions.

This system is useful in many fields, not only for banks. Blockchain's ecosystem has an advantage over classic transaction, contract and agreement process. Blockchain doesn't need a third party to verify transactions or contracts. This is one of the main reasons why Ethereum is successful and is becoming more and more popular.

How to use Smart Contracts?

Now that you know what smart contracts are, I would like to point out some areas in which this technology can be practically used. Please note that not all of these solutions can be effectively introduced into the markets.

Let's think of automated payments or money transfer. "if the event A happen X amount of money has to be transferred to party B"

This technology would automate M2M (machine to machine) payments when it comes to Internet of Things. Where you drive your Tesla through the highway and the toll fee can be collected and verified automatically without you stopping.

Smart contracts will also allow us to replace traditional contracts.... think of rental agreements, labor agreements, etc.Thanks to smart agreements, we could automate the entire process related to traditional contracts.

Think of Sport Betting. All games and bets are in most cases conditional. If one team wins, you must pay X money to the user. Smart agreements will allow you to automate this process (no middle man to verify) and reduce the costs of bookmaking services, and increase their safety.

Considering everything I just wrote, it's easy to say that this unique technology will be quickly adapted by the market. The question is not whether this will happen, but when it will happen. Therefore, everyone should have fundamental knowledge about them and use their abilities!

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What is Monero?

Monero (XMR) is a cryptocurrency that appeared for the first time on April 18, 2014. It is not known exactly who created it. Anyway, its creator probably withdrew from this project and now other people are working on it. 

At the beginning, the cryptocurrency was called Bitmonero (in Esperanto it means exactly Bitcoin). At the beginning from the technical side the whole project did not function properly, but now everything looks much better. Recent upgrade improved processing and now transaction can be recorded on the ledger within one minute!

For the creators of Monero, anonymity is extremely important. Therefore, transaction addresses are hidden which makes it impossible to find their senders and recipients. What's more, Monero offers a system of confidential transactions, which allows you to hide the amount that is included in the transfer.

Interestingly, the developers of Monero did not specify what the maximum supply of this cryptocurrency should be. At present, almost 15 million coins have been extracted. When it reaches 18 132 000 coins, their production is to be reduced. It will be about 0.6 XMR every minute per block.

The Monero project has a good chance of success, because cryptocurrencies are still gaining popularity and due to anonymity. Monero is increasingly bought by investors, thanks to which its value is systematically growing.

Read the whitpaper

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What is Dash?

DASH or, as some may refer, Digital Cash (DASH) is a cryptocurrency created by Evan Duffield. The first time it appeared on January 18, 2014. At the beginning Dash was known as Xcoin, later as Darkcoin, and from March 25, 2015 is known as Dashcoin. 

It is a decentralized coin and nobody has top-down control over it. At the very beginning, only the creator of the project worked on it. Later, gradually more people joined him. Today, Dash team is a large group of people who are systematically working to improve this project.

The maximum number of coins to be "minted" is 18 million. So far, over 7 million coins have been circulated in circulation. Every year, emissions are reduced by 7.1%. Dash production is to end around 2150. 45% of the prize for "mining" a coin goes to masternodes, 45% for people who are mining them, and 10% is spent on coin development.

Dash is often treated by investors as an excellent alternative to Bitcoin. Its value is systematically growing

Check out whitepaper

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What is Litecoin?

Litecoin (LTC) is another cryptocurrency, whose popularity in the world is systematically increasing. It was created by Charles Lee in October 2011. It allows you to transfer money quickly and cheaply to the whole world. Although, its creator took as an example of bitcoin, which is more popular today, it still has slightly better parameters than Bitcoin.

The creator of Litecoin determined that its maximum supply will be 84 million units. At present, over 50 million of this cryptocurrency has been "mined". Each Litecoin is divided into 100,000,000 smaller units.

How is this currency different from its original or Bitcoin? First of all, Litecoin processes the block every 2.5 minutes, records transaction on ledger. Bitcoin does it every 10 minutes. According to the creators of this currency, it allows for faster confirmation of transactions. 

Another difference is the cryptocurrency supply. As we have already said, 84 million "coins" of this currency are to be created, and in the case of Bitcoin, there will be only 21 million of them. 

Of course, there are also a lot of "technical" differences that affect the production of this currency, or the way in which the transaction code is saved (litecoin is using SegWit). In this case Litecoin is much lighter and its wallet does not require a lot of storage as opposed to Bitcoin. 

Does Litecoin have a chance to beat its popularity with Bitecoin? It's hard to say, but many people say that there is a chance. .

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Stochastic Oscillator

A stochastic oscillator

The Stochastic Oscillator (Stochastic) is obtained by calculating the exponential averages from the % K index, which is a current rate of the cryptocurrency.

To analyze this oscillator, it is necessary to determine the levels of overbought and out-sell. The overbought level is usually set at 90% and the selling level at 10%.

a stochastic oscillator. 

A buy signal is generated when the ratio increases above the sell-out level and the averages cross.

The sales signal is generated when the indicator drops below the overbought level. As you can see only buy signal is reliable when it comes to Bitcoin.

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Rate of Change ROC

ROC change rate

ROC (Rate of Change) is next to MACD the most used indicator of technical analysis.

To analyze this indicator, it is necessary to determine the overbought and oversold levels. These levels should be set so that in the area between them there was approx. 90% of the indicator's progress. The upper limit of this area is determined by the overbought level (mine is set at 60), while the lower limit is the sell-out level (mine is set at -20).

The buy signal is generated with the indicator rising above the sell-out level -20.

The sales signal is generated when the indicator drops below the overbought level 60.

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Commodity Channel Index CCI

CCI (Commodity Channel Index) 

The CCI oscillator is most often used to determine buy signals. CCI is most often analyzed based on the signal lines line (moving averages).

It is also possible to analyze the ratio based on the overbought / oversold levels (see ROC). The characteristic feature of CCI is that it usually generates buy signals earlier than other indicators.

The buy signal is generated when the 9MA of CCI Index crosses 14MA of CCI (at a very low level).

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Volume

Trading volume 

Investors assessing the situation on futures or crypto markets usually use the three-volume method - price, volume and number of open orders. It is estimated that the price is the most important. The volume and number of open interests are usually treated as confirmation indicators, with the volume being more important.

The number of open interests or orders ranks third. Analytical research proves that apart from the observation of price movements, tracking of volume and the number of open interests sometimes brings important indications as to the direction of the market. With this in mind, a diligent investor should follow all these values. The volume is the number of exchanges or contracts concluded in the defined period. The number of open interests is the number of non-liquidated contracts or book orders by the end of the period.

Tips for interpreting the volume and number of open orders.

Investors should observe changes in the volume and number of open book orders when assessing the market condition. The general rules for interpretation are presented below:

OBV (On Balance Volume) line

The OBV line works well to analyze the capital flow accompanying the price movements. The construction of the OBV line is quite simple. Depending on changes in the price (increase or decrease), the volume is assigned a positive or negative value, respectively. The increase in the crypto price translates into recognition of the volume with the positive sign, while the price decreases the negative volume.

We receive current cumulative balances by adding or subtracting the volume from each day, depending on the direction of the price. The rate does not matter in the case of OBV lines, while the direction of the OBV lines is important. When analyzing the OBV curve investors should use the trend line too. 

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Flags and Pennants

Flag and Pennant

Flag

The flag is one of the most "secure" formations. It is most often formed in the timeline from 3 to 4 weeks for stocks and 1 to 2 days for crypto and occurs after a very fast (almost vertical) price movement. The flag announces the continuation of traffic in a given direction.

During the formation of the flag, the volume of turnover should decrease very clearly. The range of movement after breaking from the formation should be at least equal to the size of the movement to reach it, measured from some characteristic point - eg from breaking from the previous formation or breakthrough of resistance level (measurement of movement is marked with a vertical purple line). Perfectly in line with the pattern, the flag announces the continuation of the specified range with a probability of up to 90%.

When assessing the correctness of the flag, remember that:

• formation should occur after almost vertical movement of prices (without major corrections)
• the volume should decrease very clearly during formation formation
• if the formation takes long to establish, then it could be very suspicious. Therefore don't wait to long. 
• when broken up, the volume should clearly increase.

Strategy

Price increase Flag (Figure 1)

If you have shares:

• sell if there was a distinct increase in volume during the movement that did not lead to the breakout
• sell if the break has not occurred within 3 weeks or 3 days for crypto of the beginning of the formation and the volume does not behave perfectly according to the theory
• if it breaks down, sell it immediately

If you do not have shares:

• buy after the formation of the pattern with a good volume system, do not waiting for the upward break its better to set a stop loss if broken down

Flag with access from the top (Figure 2)

If you have shares:

• sell after the formation formation (even before the break)

If you do not have shares:

• do not buy (even after breaking up)

Market example

Pennants

The Pennant is next to the flag one of the most "certain" formations. It is most often formed in the period from 3 to 4 weeks and occurs after a very fast (almost vertical) price movement. Pennant announces the continuation of movement in a given direction.

flag formation

During the formation of the pennant, the volume of turnover should decrease very clearly. The range of movement after breaking from the formation should be at least equal to the size of the movement to reach it, measured from some characteristic point - eg from breaking from the previous formation or breakthrough of resistance level (measurement of movement is marked with a vertical purple line). Ideally aligned with the pattern, the flag announces the continuation of the specified range with a probability of up to 90%.

When assessing the correctness of the pennant, keep in mind that:

• formation should occur after almost vertical movement of prices (without major corrections)
• the volume should decrease very clearly during formation formation
• the end of the formation should take place in less than 3 weeks for stocks and 3 days for crypto from the beginning of the formation - pattern longer than 3 weeks are already suspicious (the beginning of the formation was marked with the letter B in the drawing, the end with the letter E)
• when broken up, the volume should clearly increase.

Strategy 

Flag with access from the bottom (Figure 1)

If you have shares:

• sell if there was a distinct increase in volume during the movement that did not lead to the breakout
• 
  
• if it breaks down, sell it immediately

If you do not have shares:

• buy after the formation formation with a good rotation volume system, not waiting for the upward break (if you sold earlier - when you reach the formation, buy even at higher prices)

Flag with access from the top (Figure 2)

If you have shares:

• sell after the formation (even before the break).

If you do not have shares:

• do not buy (even after breaking up)

Market example

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Wedges

Wedges

An upward wedge

An upward wedge is a formation that "always" promises a price drop. It often develops during short rises with long-term falls or in the last phase of the boom. Determination of the wedge is possible only after noticing four points (1,2,3,4) turning, which determine  the upper and lower edge of the wedge. The exit from the wedge (X) should occur not earlier than 30% before its end (the beginning and the end define: the first point - the turning point and the vertex. Very often, after breaking, there is a short return movement up (marked in yellow) and only then there is a further discount. The size of the drop is indirectly dependent on the height of the wedge.

Strategy:

If you have shares:

• sell after breaking down

Drop wedge

The discounted wedge is a formation that "always" promises a price increase. It is more often shaped during the medium-term adjustment of the upward trend than during long-term decreases. Determination of the wedge is possible only after noticing four turning points (1,2,3,4), which determine two decreasing straight lines - the upper and the lower edge of the wedge. Breaking from the wedge (W) should take place no earlier than 30% before its end (the beginning and the end determine: the first point - the turning point and the vertex) and should be confirmed by the significant increase in the volume of turnover. Very often, after breaking, there is a correction and only after this correction there is a proper increase. Its length is indirectly dependent on the height of the wedge, however, the increase usually ends near the nearest clear resistance.

Strategy

If you have shares:

• sell on 3 and buy back the shares on 4

If you do not have shares:

• buy only after breaking up (confirmed by an increase in the volume of turnover and at the right time)

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Rectangular Formation

Formation of a rectangle

Rectangles are more likely to predict the continuation of the earlier trend than its reversal. The formation of the rectangle is determined by horizontal lines routed by two bottoms and tops. Only after establishing these four points can one speak of the formation of a rectangle. Within the formation, the volume of turnover should show a downward trend. Quite often, there are exactly six turning points before the strike within the rectangle.

The buy signal is generated after breaking through the upper edge, the volume must clearly increase (Figure 1). Often, after breaking, there is a correction movement - marked in green.

The sales signal is generated after the bottom edge has been pierced (Fig. 2). The size of the rise or fall in prices after breaking from the rectangle should be at least equal to the height of the formation (see the purple line in the figure).

Strategy 

If you have shares:

• as soon as the formation is established (two peaks and two bottoms, i.e. after the fourth turning point), you can buy near the bottom and sell near the top
• if it breaks down from the formation, sell it immediately
• after breaking up, sell at a break and buy back on a correction
• If you do not have shares:
• in the case of a rectangle after the rise (figure 1), buy at the sixth turning point (6)
• buy only on a correction after breaking up (confirmed by the increase in the volume)

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Triangles

Triangles (symmetrical, upward, downward)

Symmetrical triangle

The symmetrical triangle more often announces the continuation of the earlier movement than its reversal. Formation is determined by two convergent lines led by two peaks and two bottoms. It is only after determining these four points (1,2,3,4) that the formation of the pattern can be discussed. 

Within the formation, the volume should show a downward trend. Quite often within the triangle there are exactly six turning points before breaking. The buy signal is generated after breaking through the upper edge, while the volume must clearly grow. 

Not infrequently, after breaking, there is a corrective movement. 

The sales signal is generated after piercing the bottom edge of the formation. The break from the symmetrical triangle should occur within 50% to 25% before its end (vertex, peak angle) from the beginning of the formation. Very often the level determined by the vertex of the triangle is a strong support or resistance.

Strategy 

If you have shares:

• when breaking up, sell on the break and buy back the shares on the correction (if the break has been confirmed by the increase in the volume of turnover)
• if it breaks down from the formation, sell it immediately

If you do not have shares:

• buy only on a correction after breaking up (confirmed by the increase in the volume of turnover)

Note: It is very important that the knocking occurs within a certain time (50-25% before the end of the triangle)

An upward triangle

The upward triangle is a formation in which the upper edge is a horizontal line and the lower line is an upward line. Formation can be determined only after the establishment of two peaks  at the same level and two bottoms. During the development of the triangle, the volume of turnover should decrease. The buy signal is generated after breaking through the upper (horizontal) edge with a marked increase in the volume of rotation. Not infrequently, after breaking, there is a corrective movement. The breakout triangle should occur not later than 25% before its end, counting from the beginning of the formation (B), ie the first turning point to the intersection of the triangle arms (E) . The size of the price increase after breaking the triangle should be at least equal to the height of the formation measured at the second turning point (see the purple line in the figure). Very often, the level determined by the top edge is strong support after breaking out X

Strategy: 

If you have shares:

• when breaking up, sell on the break and buy back the shares on the correction (if the break has been confirmed by the increase in the volume of turnover)
• if you break down from the formation, beware of other sales signals and if they occur, sell immediately

If you do not have shares:

• buy only on a correction after breaking up (confirmed by the increase in the volume of turnover)

Note: It is very important that the knocking occurs within a certain time (not later than 25% before the end of the triangle, preferably around 2/3 of the formation's length)

A downward triangle

A downward triangle is a formation in which the bottom edge is a horizontal line and the upper line is a downward line. Formation can be determined only after establishing two lows at the same level  and two tops. During the development of the triangle, the volume of turnover should decrease. The sales signal is generated after piercing the bottom (horizontal) edge. Sometimes, after breaking, there is a corrective movement (marked in green). The break from the downhill triangle should occur not later than 25% before its end counting from the beginning of the formation (B), ie the first turning point to the intersection of the triangle arms (E).  The size of the drop after breaking the triangle should be at least equal to the height of the formation measured at the second turning point (see the purple line in the figure). Very often, the level determined by the bottom edge is a strong resistance (X).

Strategy

If you have shares:

• if it breaks down from the formation, sell it immediately

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Diamond Patterns

Diamond Patterns 

A diamond can be both a formation of the trend reversal as well as its continuation. This system has the shape of two interconnected triangles: the expansion and the isosceles.

The volume increases with the increase of price ranges (the highest should be at the highest or lowest point of the diamond), to decrease as the ranges decrease to the increase when breaking the formation. The direction of breaking out of the formation tells us whether we are dealing with a reversal (dislocation in the opposite direction to the movement) or continuation (dislocation towards the previous movement).

Diamonds appear rather rarely and look like two connected triangles: inverted and symmetrical. The formation of a formation can take place after the formation of both triangles. 

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V Shape Pattern

V Shape Formation

Formation V belongs to the formation of the reversal of the trend. This formation begins with a sharp and strong decline, followed by an equally violent turn and strong reflection, usually due to the appearance of some unexpected news, which causes the formation to take the shape of the letter V.

The difficulty in the formation of V shape is that this pattern arises without a transitional period and it is hard to capture it before its creation. Often the only herald to confirm the occurrence of it is a turning point by a very large volume. 

The indication of the extent of the increase / decrease on the basis of this formation is also somewhat difficult to determine. It can be said that V patterns are usually recognized after the fact, but then it is too late to open positions based on them.

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Cup and Handle Pattern

Cup and Handle Formation

Cup and Handle is one of the most profitable formations because the price increase after breaking out is often very large. When creating a formation, the shape of the course resembles a cup. Volume behaves similarly to the rate (it also has the shape of a cup) but its fluctuations are slightly ahead of the price movements (volume starts to rise or fall slightly earlier than the price). If the price rises during the shaping of the saucer, the volume must also grow strongly. 

The buy signal occurs after breaking above the level designating the upper boundary of the formation - this level is determined by the left part of the cup developed at the highest volume at that time. The break from the cup must be confirmed by a strong increase in the volume. Often, after breaking, there is a correction movement down (marked  yellow), after which the increase is continued. In the charts of cryptocurrency with small capitalization and low share prices, it is sometimes possible to create few cups in a row (one after the other, each at a slightly higher level). 

or multiple:

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Double Top and Double Bottom Patterns

Double Top 

This formation (also known as "M") occurs in the final stage of the long- or medium-term Price Increases and promises to reverse the trend. Formation is determined by two price peaks at the same level (green line) separated by a distinct decreases in prices. The turnover volume is often the largest when setting the first peak. The sale signal is generated after breaking below the bottom price (red line) generated between two peaks and must be accompanied by a marked increase in the volume. Sometimes, after breaking, we deal with a Bull trap (yellow line).

Double Bottom

This formation (also known as "W") occurs in the final stage of the long- or medium-term price decrease and promises to reverse the trend. Formation is determined by two price bottoms (red line) at the same level separated by a distinct increase in prices. The turnover volume is often the largest when setting the first bottom. The buy signal is generated after breaking above the price top (green line) generated between two bottoms and must be accompanied by a marked increase in the volume. Sometimes, after breaking, we deal with a Bear trap (yellow line).

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Inverted Head and Shoulders

Head and Shoulders Inverted Formation 

The reverse head and shoulder formation also belongs to the classic price structures that reverse the trend. This structure announces the end of the downward trend.

Full formation education occurs after determining four characteristic points (1,2,3 and 4). Points (1) and (3) indicate the formation arms, point (2) means head. The last, fourth point is determined after breaking the line of the neck (marked with a thin blue line).

In the classic form of this formation, the turnover should be shaped in accordance with the price formation and the direction of the new nascent upward trend.

• The left arm is shaped on a relatively small volume.
• The head should be shaped on an even smaller volume.
• The first increase in the increased volume turnover and the subsequent decrease in the smaller volume turnover are the characteristic features of shaping the right arm in the classic form of this formation.
• An increase in the price above the neck line should take place with increased demand side activity expressed in turnover, which absorbs large supply at higher and higher price levels.

Overcoming the neck line on a high volume is a confirmation of formation and a buy signal for a given market. Any subsequent return of price to the neck line (return movement) should take place on a smaller turnover, which would confirm its corrective character in relation to the emerging new upward trend.

The size of the price movement after breaking the formation (above the breaking point- red dot) should be at least equal to the head height measured from the neck line (purple line).

Note 1: The neck line does not have to be horizontal.

Note 2: Formation "mutations" are possible, e.g. two heads.

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Head and Shoulders Formations

Head and Shoulders formation

Formation of the head and shoulders belongs to the classics of technical analysis and is one of the basic price structures reversing the upward trend. This price structure consists of three peaks shaped at the top of the upward trend. The left peak (left shoulder) and the right top (right shoulder) are shaped at a slightly lower level than the central maximum (head).

Full formation education occurs after determining four characteristic points (1,2,3 and 4). Points (1) and (3) indicate the formation arms, point (2) means head. The last, fourth point is determined after piercing the neck line (marked with a thin blue line).

The maintenance of the volume of turnover is a very important element in shaping this price structure.

• The amount of rotation during shaping the head should be less than during shaping the left arm. This behavior of turnover is the first sign of weakening of the upward trend.
• The right arm should be shaped on an even smaller volume of rotation.
• The price drop below the neck line should take place on the increased turnover volume, which proves the aggressive approach of the supply side, which quickly satisfies the reported demand at ever lower price levels.

The possible return of the price to the height of the neck line should take place with definitely lower turnover.

The confirmation of the formation is a subsequent price decline confirmed by a large volume of trade. The minimum extent of the decline is calculated by measuring the height of the formation from the neck line down.

The size of the price movement after breaking the formation (measured from the breaking point - red dot) should be at least equal to the height of the head above the neck line (purple line).

Note 1: The neck line does not have to be horizontal.

Note 2: It is possible to "mutations" form the head and shoulders, e.g. two heads.

If you have shares:

sell if the price drops at least 5% below the neckline

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Fibonacci Level Lines

The Fibonacci Levels 

The Fibonacci number string is used by many investors around the world. Fibonacci numbers in investments are most often used in two ways:

• As the elimination of vertical price levels and
• As target levels, prices in time (level).

Leonardo Fibonacci was one of the most famous Italian mathematicians. The effect of his mathematical inquisitiveness was to create a series of numbers that have interesting properties and which often occur spontaneously in nature as an ideal representation of proportions. The string that we are interested in is briefly described in this way: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 etc. The number that we are interested in arises by summing up two previous ones, for example: 1 + 2 = 3; 2 + 3 = 5; 5 + 8 = 13 etc.

Another interesting property of the string is the fact that if we divide the number by the number of the next in the string, we always get a result close to 0.618, for example: 5/8 = 0.625; 34/55 = 0.618; 89/144 = 0.618 and if we divide the number by its predecessor, we get an oscillating result around 1.618, e.g. 55/34 = 1.617, 144/89 = 1.6179, 233/144 = 1.618 - both of these properties are known in geometry as golden breakdown. If we would like to divide the number by the second in number, we always get a value close to 0.382, for example: 34/89 = 0.382, 55/144 = 0.381, etc. The string has many interesting properties, however, the above are the most important for us.

In technical analysis, the most common values ​​are: 0.236; 0.382; 0,500; 0.618; 1; 1.382 and 1.618.

Traders use the Fibonacci lifts to:

• marking support / resistance,
• destinations (ie places of profits and stop loss orders).

The market often "descends" slightly below 38.2 or 61.8% of the level of the preceding wave, followed by a clear reflection and continuation of the previous movement. These types of traps happen at every step.

Thus, it turns out that if the market violates the 61.8% lifting, it very often stops at 0.685 of the previous wave and then returns to its original direction.

There are also frequent situations in which the market stands above the important peaks and then negates the breakdown, price going below its level and creating a formation similar to a double peak (similar scenarios also occur in the case of unsuccessful attempts to break the market below significant bottoms).

Looking at such characteristic and repeated market behaviors, you can calculate the level of support or resistance using Fibonacci numbers.

This situation is also in case of attempting to pierce an important peak. In this scenario, the market often stops at the external level of the preceding wave, which is usually 138.2% or 161.8%.

Following is the video of how to use Fibonacci lines tool in Trading View.

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Charts

Charts

Charts are the investor's best friend on the stock or crypto market. As an investor, you'll probably use charts more often than other available tools. As the charts will probably play a significant role in your investments, it is necessary to familiarize yourself with them. The more comfortable you feel using the charts, the better you will be an investor.

To help you get acquainted with and effectively use charts, we will further develop the following concepts:

• Rules for creating charts
• Time periods of charts
• Types of charts

Chart options

Let's start with the basics and look at how the price charts are created. When you understand the basics, you will be more successful in applying the more advanced concepts of technical analysis.

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• The graph consists of two axes: the X axis (horizontal) and the Y axis (vertical).
• The X axis runs horizontally along the chart, indicating the time of price changes that have occurred on the selected instrument.
• The Y axis runs vertically along the left part of the graph, showing the price movement on the chart. Lower prices are at the bottom of the axis, higher at the top.
• When you put together the X axis with the Y axis, you'll see the exact stock prices in the time period you have chosen in the past.

Time periods of charts

Charts allow you to analyze the movement of prices of shares selected by you in different time periods:

• Minutes
• Hourly
• Daily
• Weekly
• Monthly

If you are a short-term player, you will use shorter periods in your charts. In the case of a long-term approach, charts with a larger time range may be used. For example, an investor wishing to make a quick transaction with a profit of 10-20 cents will probably use minutes charts. An investor who wants to keep positions for much longer, uses hourly or even daily charts.

Some investors use charts with different periods at the same time, so that they can watch the movement of prices from different points of view. We will discuss this concept later.

Types of charts

Charts give you the opportunity to analyze the price movements of any action in various formats: line charts, bar graphs, candle charts. You have the option of choosing a way of presenting the data that suits you best.

Technical analysis is a visual, almost artistic, skill that investors develop by trying different variants. Some believe that they can better determine support or resistance levels in line charts, while others believe that candle charts provide more information.

Technical analysts usually use one of the following three chart types:

Line graph

Line charts are the most basic type of chart. Technical analysts often use these kinds of charts to identify support or resistance levels more easily. These charts contain only basic information.

Creating a line chart involves combining all courses, e.g. closing or opening. Line charts can also show all transactions that took place in a given period (intraday charts). The line chart (intraday) is shown in the following illustration.

A bar graph

Bar charts provide more information than line charts. Technical analysts often use charts of this type to observe how prices changed during each period in the chart. While the line graph only shows closing rates, the bar chart also shows the opening price, maximum and minimum values ​​for each period.

Creating a bar graph involves drawing a series of bars along the graph. Each bar represents one period. To create a bar, it is necessary to draw the maximum and minimum price from the selected period. Then, mark the opening price on the left side of the post with a horizontal line and the closing price on the right.

The opportunity to see the opening level of the selected period for a given company and the closing level allows better identification of trends. If the price closes higher than the opening, it means that demand for the selected period prevailed. Conversely, when closing below the opening level.

Candle chart

Candle charts provide the same information as bar charts, but in a slightly different format. Technical analysts very often use candle charts as a replacement for bar charts, mainly due to the ease of identifying different patterns of market behavior. In fact, on the basis of this kind of charts, the field of chart analysis was created.

Creating candle charts is about sketching the next candles along the chart. Each candle represents one period. Creating a candle consists in drawing a vertical line connecting the maximum and minimum for a given period. This line is called the candle's shadow. Then, use horizontal lines to open and close and fill in in sequence.

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