The most common mistake is relying on a single indicator. While technical analysis focuses on price action and chart patterns, you should also consider the impact of fundamental events, such as regulatory changes, major partnerships, technological updates, possible black swans, and hacks. Making decisions without considering the broader market context. You should never feel overconfident and you must use a combination of complementary indicators to validate trading signals. Consequently, remember to combine technical analysis with fundamental analysis to have a broader overview of both the single asset and the wider crypto ecosystem.

Readings above 80 indicate overbought conditions. A declining OBV signals selling pressure. Readings below 20 suggest oversold conditions. Tracks cumulative buying and selling pressure by adding volume on up days and subtracting it on down days. The volume provides insight into the strength or weakness of a price move. This oscillator is particularly useful in sideways markets, where it can identify turning points more effectively. A rising OBV indicates strong buying pressure.

Now, let’s clarify once again what support and resistance levels are. These levels help traders predict potential turning points in the market and guide entry and exit decisions. Support and resistance levels are foundational concepts in technical analysis, serving as critical reference points for price movements. A price level where buying pressure is expected to be strong enough to prevent further price decline. Traders view this as a potential “floor” where prices may bounce back up, and it can be used as a stop-loss level, as it’s unlikely the price will go – Read This method – lower than it (if the trend doesn’t change).

When prices touch or exceed the upper band, the asset may be overbought, signaling a potential reversal. In crypto markets, where sudden price spikes are common, Bollinger Bands can help traders anticipate breakout scenarios. The stochastic oscillator compares an asset’s closing price to its price range over a specified period to identify overbought and oversold conditions. When prices approach or fall below the lower band, the asset may be oversold, presenting a buying opportunity.