No gear, no problem! 3 ways to earn Bitcoin through cloud mining and staking

August 13, 2021 Coin Telegraph

Operational costs are high, but Bitcoin miners are making money hand over fist. Here’s how to join them and profit.

Bitcoin’s (BTC) rapid recovery above $46,000 has renewed calls for a $100,000 BTC price by the end of 2021, while the effects of China’s crackdown on the mining industry are slowly beginning to fade as the Bitcoin network hash rate shows signs of recovery.

*Bitcoin mean hash rate vs. price. Source:* *Glassnode*

One of the side benefits of China’s crackdown is that it has lowered the barriers of entry into the Bitcoin mining space, which has been shown to provide profits in both bull and bear markets.

Bitcoin mining is one of the few ways that investors can acquire BTC without directly purchasing it from the market, and is quickly becoming an industry dominated by big money interests that can afford the electricity costs and upkeep required to run a mining operation.

Here are some options available for the average crypto stacker to acquire more BTC through cloud mining contracts, crypto lending platforms and centralized exchanges (CEX).

Cloud mining contracts

The cloud mining industry has been around since Bitcoin’s early days, and it offers those interested in mining Bitcoin who lack the space, equipment and electricity required an opportunity to outsource their production.

Some of the more well-known companies that offered cloud mining services include Genesis Mining and HashNest, but demand for their services has exceeded their capabilities, resulting in all their Bitcoin mining contracts being sold out.

One of the current mining operators with available contracts is Shamining, a company based in the United Kingdom that has been in operation since 2018, and claims to have data centers worldwide with locations in California, Mexico, Cape Town, South Africa and London, England.

Through this service, users can rent mining equipment and pay for the associated costs of operating the units, while the company handles the physical housing, operation and maintenance. Once operational, generated proceeds can be withdrawn to a Bitcoin wallet specified by the user.

Current rental contracts include two options for GPU miners, which cost around $283 for 23,580 gigahashes per second (GH/s) or $1,066 for 94,340 GH/s, and another option for ASIC miners with a current cost of $2,571 for 235,849 GH/s of mining power.

All contracts indicate that they have profitability that starts at 143%.

Another option that allows users more flexibility regarding the parameters of their mining contract is ECOS, a company that grew out of the Free Economic Zone located in Hrazdan, Armenia, and has been in operation since 2017.

*ECOS cloud mining profitability calculator. Source:* *ECOS*

As seen in the graphic above, a 50-month contract for 9 terahashes per second currently costs $1,668 and is projected to result in a profit of 272.82% at a BTC price of $70,000.

It should be noted that all cloud mining services offer warnings about the high risks involved and that no level of profit can be guaranteed. This could be due to a variety of circumstances, including fluctuating electricity prices, Bitcoin price volatility and advances in mining technology that lead to substantial increases in mining difficulty, which renders older equipment obsolete.

Crypto lending services

A more traditional option available for hodlers to acquire more Bitcoin by utilizing their current stack that doesn’t require any further investment, like mining, is through lending services that offer a yield on deposits.

Nexo and Celsius are two of the most well-known lending platforms that allow cryptocurrency users to borrow funds against their crypto holdings or earn rewards for deposits.

At the time of writing, Celsius offers users an annual percentage yield (APY) of 6.2% for Bitcoin deposits, and Nexo offers a standard return of 5% on flexible-term deposits, while fixed-term deposits that go a minimum of one month can earn 6%.

A third option that provides users with a 4% return on BTC deposits is BlockFi, a crypto asset service provider that offers interest accounts and crypto-backed loans and has also recently launched a Bitcoin rewards credit card.

Earn BTC from centralized exchanges

Several centralized exchanges also offer Bitcoin holders a return on their BTC deposits, albeit at lower rates than those mentioned above.

Binance, the largest CEX in the crypto ecosystem, offers users an estimated APY of 0.5%, while third-ranked exchange Huobi offers 1.32%.

The best yield offered on a United States-based CEX can be found on Gemini where users can earn 1.65% on their deposits.

KuCoin offers a more free-market approach to BTC lending where lenders can set the parameters of the loan terms, choosing between contract lengths of seven days, 14 days and 28 days while getting to set their own daily interest rates to compete with other lenders on the market.

The lowest rate currently offered on KuCoin is an annual rate of 1.82% on a seven-day contract.

As seen in the data provided, there are multiple ways to increase a Bitcoin stack as opposed to simply buying on the open market, but they are becoming scarcer as time progresses.

With large institutions, energy companies and governments beginning to develop Bitcoin mining infrastructures, smaller market participants are increasingly being squeezed out as cloud mining facilities are unable to keep pace with demand.

Bitcoin lending is increasingly looking like the main way BTC holders will be able to earn a yield paid in BTC in the future, while Bitcoin-backed loans offer a way for hodlers to access the value of their tokens without the need to sell and create a taxable event.

Want more information about trading and investing in crypto markets?

MicroStrategy and Bitcoin mining stocks rally as BTC’s price rebounds
Cryptocurrency mining under proposed U.S. policy changes
SEC Chair wants a robust crypto regulatory regime for the U.S.
BlockFi faces regulatory heat, a sign of possible crypto lending regulations?
5 easy ways crypto investors can make money without needing to trade

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Pro traders look for this classic pattern to spot Bitcoin price reversals

July 31, 2021 Coin Telegraph

Coin Telegraph

Crypto and stock traders view the inverse head-and-shoulders pattern as an early signal that a bullish trend reversal is in the making.

Every trader aims to buy low and sell high, but only a few are able to muster the courage to go against the herd and purchase when the downtrend reverses direction.

When prices are falling, the sentiment is negative and fear is at extreme levels, but it's at times like these that the inverse head and shoulders (IHS) pattern can appear.

The (IHS) pattern is similar in construction to the regular H&S top pattern, but the formation is inverted. On completion, the (IHS) pattern signals an end of the downtrend and the start of a new uptrend.

Inverse head and shoulders basics

The (IHS) pattern is a reversal setup that forms after a downtrend. It has a head, a left shoulder and a right shoulder that are upside down and placed below a neckline. A breakout and close above the neckline completes the setup, indicating that the downtrend has reversed.

*Head-and-shoulders bottom pattern. Source:* *TradingView*

As shown above, the asset is in a downtrend but after a significant decline, value buyers believe the price has reached attractive levels and will start bottom fishing. When demand exceeds supply, the asset forms the first trough from the left shoulder and the price starts a relief rally.

In a downtrend, traders sell on rallies. The bears sell aggressively after the pullback and the price dips below the first trough, making a lower low. However, bears are unable to capitalize on this weakness and resume the downtrend. The bulls buy this dip and start a relief rally, forming the head of the pattern. As the price nears the previous peak where the rally had stalled, the bears again step in.

That starts the decline, culminating in the formation of the third trough, which is arrested almost in line with the first trough as buyers anticipate a turnaround and purchase aggressively. This forms the right shoulder of the setup. The price turns up and this time, the bulls manage to push the price above the neckline, completing the pattern.

The neckline thereafter becomes the new floor as traders buy the dip to this support. This signals the start of a new uptrend.

Identifying a new uptrend with the (IHS) pattern

*BTC/USDT daily chart. Source:* *TradingView*

Bitcoin (BTC) had been in a downtrend since forming a local top at $13,970 on June 26, 2019. The buyers stepped in and arrested the decline in the $7,000 to $6,500 support zone, forming the left shoulder of the (IHS) pattern. This started a relief rally that pushed the price to $10,450. At this level, short-term bulls booked profits and bears initiated short positions, aiming to resume the downtrend.

Aggressive selling broke the support at $6,500 and the Bitcoin/Tether (USDT) pair plunged to $3,782.13 on March 13, 2020. The bulls viewed this fall as a buying opportunity and that started a strong relief rally, which reached close to $10,450. This second trough formed the head of the setup.

The right shoulder was shallow because the selling pressure was reduced and bulls did not wait for a deeper correction to buy. Finally, the bulls pushed the price above the neckline on July 27, completing the (IHS) pattern.

The bears tried to trap the bulls and they pulled the price back to the neckline. Although the price dipped just below the neckline, traders did not allow the pair to sustain below $10,000. This suggested a change in sentiment. The bullish momentum picked up as buyers pushed the price above $12,500.

How to calculate the pattern target of a IHS setup

To calculate the minimum target objective of the (IHS) pattern, calculate the depth from the neckline to the lowest point, forming the head. In the above example, the neckline is around $10,450, and subtracting the lowest point at $3,782.13 gives a depth of $6,667.87.

This value is then added to the breakout level, which in the above example, is near $10,550. This gives a target objective at $17,217.87. When a trend changes from down to up, it may fall short or exceed the target objective. Therefore, traders should use the target as a guide and not dump their positions just because the level has been reached.

Patience pays o because sometimes the pattern fails

No pattern succeeds at every breakout and traders should wait for the setup to complete before initiating the trades. Sometimes, the pattern structure forms but the breakout does not happen. Traders who preempt the completion of the pattern and initiate trades get trapped.

*LINK/USDT daily chart. Source:* *TradingView*

For example, Chainlink’s LINK topped out at $4.58 on June 29, 2019, and started a correction. The buyers attempted to stall the decline in the $2.20 to $2.00 zone. This formed an (IHS) pattern with a head and two shoulders as can be seen in the chart above.

Although the price reached the neckline on Aug. 19, 2019, the buyers could not push the price above it. Due to this, the pattern did not complete and the buy signal did not trigger.

The LINK/USDT pair turned down from the neckline and broke below the head of the setup at $1.96, invalidating the pattern. This trapped traders who may have purchased in anticipation of a trend reversal.

Key takeaways

The (IHS) pattern could be a useful tool for traders to jump on a new uptrend as it is getting started. There are a few important points to remember while using this setup.

Traders should wait for the pattern to complete, which happens after the price breaks and closes above the neckline, before initiating any long positions. A breakout of the neckline, which is on above-average volume, is more likely to result in a new uptrend compared to a breakout that happens on low volumes.

When a trend reverses, it generally continues for a long time. Therefore, traders should not be in a hurry to dump positions only because the pattern target has been met. At other times, the pattern completes but quickly reverses direction and the price plummets. Traders should closely watch the other indicators and price action before squaring up a position.

This classic trading pattern signaled that Bitcoin price had hit a top

July 25, 2021 Coin Telegraph

Bitcoin Price

In technical analysis, traders interpret the head and shoulders formation as a strong sign that a trend reversal is in process.

Traders tend to focus too much on timing the right entry to a trade, but very few focus on developing a strategy for exiting positions. If one sells too early, sizable gains are left on the table and if the position is held for too long, the markets quickly snatch back the profits. Therefore, it is necessary to identify and close a trade as soon as the trend starts to reverse.

One classical setup that is considered reliable in spotting a trend reversal is the head-and-shoulders (H&S) pattern. On the longer timeframes, the H&S pattern does not form often, but when it does, traders should take note and act accordingly.

Let’s look at a few ways to identify the H&S pattern and when to act on it.

Head-and-shoulders basics

The H&S pattern forms after a bull phase and indicates that a reversal may be around the corner. As the name indicates, the formation consists of a head, a left shoulder, a right shoulder, and a distinct neckline. When the pattern completes, the trend usually reverses direction.

*Head-and-shoulders top pattern. Source:* *TradingView*

The above image shows the structure of an H&S pattern. Before the formation of the setup, the asset is in an uptrend. At the peak where the left shoulder forms, traders book profits and this results in a decline. This forms the first trough but it is not yet a strong enough signal to provoke a trend change.

Lower levels again attract buying because the trend is still bullish and buyers manage to push the price above the left shoulder, but they are not able to sustain the uptrend.

Profit-booking by the bulls and shorting by counter-trend traders pull the price down, which finds support near the previous trough. Joining these two troughs forms the neckline of the setup.

As the price rebounds off the neckline, the bulls make one more attempt to resume the uptrend but as the price reaches the height close to the left shoulder, profit-booking sets in and the rally fizzles out.

This lower peak forms the right shoulder and is usually in line with the left shoulder. The up-move reverses and the selling picks up momentum. Finally, the bears succeed in pulling the price below the neckline. This completes the bearish pattern and the trend reverses from bullish to bearish.

Spotting trend reversals with the H&S pattern

Bitcoin (BTC) started a strong up-move after breaking out at $20,000 in December 2020. The BTC/USDT pair hit a local peak at $61,844 on March 13 and the price corrected, forming a trough on March 25. This local peak was the left shoulder.

The bulls considered the dip as a buying opportunity because the trend was still up. Aggressive buying then pushed the price above $61,844 and the pair hit a new all-time high at $64,854 on April 14. This level attracted selling, which pulled the price down to form the second trough on April 25. The middle peak, higher than the other peaks, formed the head.

Another attempt by the bulls to resume the uptrend failed on May 10. This formed the right shoulder and the ensuing correction broke below the neckline of the pattern. The breakdown and close below the neckline on May 15 completed this bearish setup.

Sometimes, after the breakdown, the price retests the breakdown level from the neckline but when the momentum is strong the retest may not happen, an example which is shown in the chart above.

To calculate the pattern target of this setup, determine the distance from the neckline to the top of the head. In this case, the value is $15,150. This distance is then subtracted from the breakdown point on the neckline to arrive at the minimum target objective.

In the above example, the breakdown happened close to $48,000. This projected a pattern target at $32,850. This figure should be used as a guide because sometimes the decline exceeds the target, and in other scenarios the down move ends without reaching the target objective.

Head-and-shoulders sometimes fail

Sometimes traders jump the gun and take counter-trend positions before the price breaks below the neckline of the developing H&S formation. Other times, the break below the neckline does not see follow-up selling and the price climbs back above the neckline. These instances may lead to failed setup, trapping the aggressive bears who are forced to cover their positions and this results in a short squeeze.

*ADA/USDT daily chart. Source:* *TradingView*

Cardano (ADA) started an uptrend from the $0.10 level on Nov. 20, 2020. The uptrend hit resistance in the $0.35 to $0.40 zone in January and a H&S pattern started developing. The price dipped to the neckline on Jan. 27, but the bears could not sink and close the ADA/USDT pair below the support.

When the price rebounded off the neckline on Jan. 28, it was a signal that the sentiment remained bullish. There was a minor hiccup on Jan. 30 and 31 when bears attempted to stall the up-move near the right shoulder but sustained buying from the bulls pushed the price above the head on Feb. 1. This break above the head of the pattern invalidated the setup.

When a bearish setup fails, it catches several aggressive sellers on the wrong foot. This results in a short squeeze and propels the price higher. The same thing happened in the above example and the pair soared in February.

Key takeaways

The H&S pattern is considered a reliable reversal pattern but there are some important points to bear in mind.

A downward sloping or flat neckline is considered to be a more reliable pattern compared to an upsloping neckline. Traders should wait for the price to break down and close below the neckline before initiating trades. Pre-empting the setup could result in losses because a failed bearish pattern could result in a strong rally.

The pattern targets should only be used as a guide because sometimes the price may overshoot and continue the down move and at other times it may reverse direction before reaching the target objective.

Here’s one way to trade Bitcoin even as BTC price teeters over an abyss

July 18, 2021 Coin Telegraph

bitcoin options

Bears have pushed Bitcoin price to the lowest rungs of its current range, but savvy traders can still generate a nice profit via the Iron Condor options strategy.

In the last 29 days, Bitcoin (BTC) has been ranging from $31,000 to $36,000 as the impact of the recent China ban and a $1.4 billion Grayscale GBTC share unlocking continue to pressure markets.

China’s government implemented a series of measures to curb cryptocurrency mining and trading by ordering the immediate shut down of some operations and instructing domestic banks to suspend the bank accounts of entities involved in the industry.

Meanwhile, the $21 billion trust fund Grayscale and its GBTC security is facing a troublesome period as institutional investors’ 6-month lock up comes to an end, creating a potential $1.4 billion sell-off. However, it's worth noting that the 654,000 BTC tokens under management will not be moved on the market.

As a result of these factors, Bitcoin price has been stuck in a range for months and generally traders appear to be sitting on their hands until clarity on the entire situation clears up.

While traders are skilled at using perpetual futures contracts, most are unaware of additional instruments that can be used to maximize their gains. This holds especially true when markets range sideways and creates a perfect scenario for trading options.

For example, one can build an options strategy that maximizes gains even when there is not much price action.

By using both call (buy) and put (sell) options, a trader can create strategies to generate gains in sideways markets. These can be used in bullish and bearish circumstances, and most derivatives exchanges offer accessible options platforms.

The Iron Condor strategy favors a tight range

The Iron Condor is a neutral strategy that consists of selling a $32,000 put to create positive exposure to Bitcoin while simultaneously selling a $34,000 call to reduce gains above that level. These trades were modelled from Bitcoin price at $31,750 and this trade uses an Aug. 27 expiry (40 days).

Profit / Loss estimate. Source: Deribit Position Builder

Two out-of-the-money (small odds) positions are needed to protect from the possible price crashes below $28,000 or Bitcoin appreciation above $38,000. These additional trades will give the trader peace of mind while also reducing the margin (collateral) requirements.

Any outcome on Aug. 27 between $29,200 (down 8%) and $36,660 (up 15%) yields a positive result. The maximum gain happens between $31,800 and $34,200, resulting in a 0.09 Bitcoin profit. On the other hand, the worst outcome is a 0.045 Bitcoin loss.

A similar structure could be deployed for Ethereum (ETH) options but traders should account for the London hard fork on Aug. 4, which could potentially induce sharper volatility.

How to get involved with crypto: The first step into blockchain industry

July 17, 2021 Coin Telegraph

Adoption

The crypto and blockchain industry has blossomed into a large sea of activity and development, divided into various niches.

The cryptocurrency industry has grown immensely in the years since it began. Following Bitcoin’s (BTC) launch in 2009, an entire industry has sprung up and flourished around the innovative asset and its underlying blockchain technology. People have created thousands of crypto projects, numerous different blockchains and a number of different blockchain technological specifications and variants.

With such a deep and vast industry, how do you know where to start if you want to get involved? Start with your interests and talents.

The cryptocurrency and blockchain industry (also sometimes referred to as simply the blockchain industry or the crypto industry) has branched out into a number of specific niches in which you can participate in various capacities. The factions of these industries explained in this article are not an exhaustive list, but provide a few examples of different niches within the space.

The niches mentioned are also not particularly coined or accepted industry-wide and may be grouped differently or classified differently, depending on who you talk to or what source you investigate. Some niches can also overlap with other niches within the overall industry.

Developers

Tech-savvy folks who can code might be interested in this section of crypto and blockchain. This could mean constructing decentralized applications, helping develop blockchains, or working on technical specifications for crypto assets. Developers put together the underpinnings of the industry’s solutions and assets.

To understand blockchain, check out — How does blockchain work? Everything there is to know

Numerous areas of potential interest fall under the developer category. The decentralized finance (DeFi) niche of the crypto space became prominent in 2020, introducing a whole new demand for digital asset swapping and related infrastructures. DeFi involves solutions for functions such as crypto-based loans.

To learn more about DeFi, read — DeFi: A comprehensive guide to decentralized finance

Another potential area for tech-interested folks is that of nonfungible tokens (NFTs), which exploded in prevalence in 2021, offering a new way to authenticate and track unique items of value. The NFT subdivision of crypto needs folks with technical skills to build out solutions around existing use cases, as well as explore uncharted usages of the tech.

Interested in NFTs? Check out Cointelegraph Magazine’s Nonfungible tokens quick guide

Traders

Crypto trading is similar to stock trading in some ways. The crypto industry boasts thousands of digital assets that each fluctuate in price. Trading crypto involves buying and selling assets in search of profit. Traders are not so much concerned with what an asset does and how it works as much as they are interested in whether or not they can buy assets and sell them at higher prices, or vice versa.

Traders may be interested in the latest news, looking to buy and sell based on hype or expectations. Traders also often use price charts, gauging price patterns and price indicators. Charting price action is called technical analysis. Additionally, since Bitcoin and other cryptocurrencies show asset movement publicly on their blockchains, analysts can come up with their own conclusions based on transactions and activity — known as on-chain analysis.

For more on crypto trading, read: How to trade cryptocurrencies: The ultimate beginner's guide

Trading can also overlap with the developer’s niche, as traders may want to build (or have someone else build) trading bots, customer chart indicators and other useful trading tools.

Regulation

How does crypto fit into countries’ existing laws and regulations? Should regions craft new laws and guidelines for crypto and blockchain? Regulation has been a growing area of focus as the crypto industry continues to develop for years to come.

Cryptocurrency classifications as assets have come along slowly. Bitcoin and Ethereum (ETH) are generally viewed as commodities, but the classification for the many other crypto assets in the industry has been less than clear.

The United States Securities and Exchange Commission (SEC) took action against Ripple in 2020 regarding the status of XRP, an asset Ripple has been involved with in various capacities over the years. Other regulatory action also exists in crypto and blockchain, such as the ongoing scene with crypto exchanges and their regions of operation.

Crypto or blockchain-interested folks in the mainstream legal or regulatory field might find an overlap of their passions by diving into crypto regulation in some capacity. This might include working on crypto projects’ legal and compliance teams, working with policy groups and think tanks, or serving directly within governments to elicit change.

Company builders

Leaders and visionaries may have the desire to improve the crypto space by creating a project or business that solves an identified problem or need. Innovators have birthed countless projects in the space over the years, helping to grow the industry from a single asset into an entire sector.

Building a company might involve identifying something that is missing in crypto or blockchain space, then subsequently hiring and leading a team focused on providing a particular solution to that problem.

For more about crypto regulation, read: Will regulation adapt to crypto, or crypto to regulation? Experts answer

Overlap in this category exists, as company builders may also have expertise in coding, regulation, or another of the aforementioned fields.

Content creators

Social media and internet growth have opened the door for participants to share their thoughts and expertise globally. Virtually anyone can learn vast amounts of information about the crypto space through YouTube, Twitter and other methods, and then add their own expertise to the equation by providing their own content.

Content streams can include writing about crypto and blockchain on a personal blog or for a media company, making YouTube content, Medium posts, and more. Content creation can overlap with all of the other categories mentioned in this article as well. Developers, traders and regulatory professionals can all create their own content.

Is Bitcoin overbought or oversold? Use Bollinger Bands to find out!

July 8, 2021 Coin Telegraph

Coin Telegraph

Bollinger Bands are a powerful indicator that traders use to gain clarity when the markets are rallying, consolidating and correcting.

Trading is neither an exact science nor art. It is a mixture of both. There are scores of publicly available indicators and each claims to be the best. However, none of them are perfect or designed to be used in isolation.

One of the more popular indicators widely used by several traders is Bollinger Bands, an indicator that can be used to spot price peaks, lows, and opportunities for shorting during exhausted rallies and buying during sharp pullbacks.

Let’s learn three simple methods to use this indicator in trading.

What are Bollinger Bands?

John Bollinger created and copyrighted the Bollinger Bands in the 1980s. The indicator consists of a middle band, which is a simple moving average whose default is set at 20-periods and two outer bands set at two standard deviations below and above the middle band.

Its most basic use is to identify whether the price is high or low on a relative basis. If the price is above the upper band, the asset is perceived to be overbought. On the other hand, if the price dips below the lower band, the coin is believed to be oversold.

However, many traders make the mistake of assuming that the asset price will drop when it reaches the upper band, or that a rally will start when the price hits the lower band.

This generally happens only when the price is stuck in a range. As with any other indicator, assumptions can easily lead to huge losses in a trending market so looking for confluence from a number of metrics is still a good pratice to employ.

Let’s look at a few ways traders use the Bollinger Bands.

Bollinger Bands can spot volatility squeezes

According to John Bollinger, assets switch between phases of low volatility and high volatility. Therefore, after periods of low volatility, traders may expect the volatility to shoot up, which could result in trending moves.

*XRP/USDT daily chart. Source:* *TradingView*

The above chart shows how XRP’s volatility dropped sharply between mid-September to mid-November 2020, marked as an ellipse on the chart. After about two months of this low volatile phase, the volatility shot up and the XRP/USDT pair offered an excellent trading opportunity.

*BNB/USDT daily chart. Source:* *TradingView*

In the above example, Binance Coin (BNB) was in a downtrend and the volatility tightened between the end-September to mid-November 2018, marked as an ellipse on the chart. Here, the volatility expanded to the downside and the BNB/USDT pair resumed its downtrend.

A volatility squeeze does not predict the direction of the next breakout. Sometimes, the market makers nudge the price above the upper band and below the lower band, trapping the novice traders. Therefore, traders may avoid pre-empting the direction and wait for the price to either break above the resistance or below the support of the range before establishing a position.

*ETC/USDT daily chart. Source:* *TradingView*

The above chart shows how the overly eager bulls and bears can become trapped. On Oct. 22, 2020, the bulls pushed the price above the upper band but could not clear the resistance at $5.77. After a few days on Nov. 3, 2020, the price pulled below the lower band but did not break the support at $4.58.

Ethereum Classic (ETC) broke above $5.77 on Nov. 18, 2020, but it was not a perfect trade as the price did not start a strong uptrend. The market makers went hunting for buyers’ stops and also tried to trap the bears with the sharp drop on Dec. 23, 2020.

However, the price quickly climbed back above the lower band on Dec. 24, 2020, and the ETC/USDT pair soon started a strong up-move.

Therefore, instead of relying only on the signal from the Bollinger Bands, traders should also look for confirmation from other supportive indicators or use the support and resistance lines.

Bollinger Bands can signal when to buy during a pullback

A pullback in an uptrend is usually a buying opportunity as the main trend tends to reassert itself. When the middle band slopes up and the price trades in the area between the middle band and the upper band, it is a sign of an uptrend. In this scenario, traders may wait for the bounce off the middle band to initiate long positions.

*LTC/USDT daily chart. Source:* *TradingView*

Litecoin’s (LTC) chart shows the start of an uptrend in mid-February 2019 as the middle band turned up and the price traded between the middle band and the upper band. After that happens, traders may attempt to buy the rebound off the middle band and keep the stop-loss just below the swing low.

There were five possible entry opportunities for a conservative trader. Four of them turned out to be winners but one would have hit the stops. This shows how no strategy is perfect, hence a stop-loss should always be used to limit the risk.

*SOL/USDT daily chart. Source:* *TradingView*

Solana (SOL) turned down from above the upper band on Sep. 1, 2020, and broke below the middle band on Sep. 3, 2020. Since then, the price largely remained inside the lower band, which turned down on Oct. 2, 2020. That confirmed the downtrend and gave an opportunity to traders to short on Oct. 13, 2020, as the downtrend resumed, following a move to the middle band.

Two Bollinger Bands can be used to track strong uptrends

One of the most profitable ways to trade is to buy and hold during strong uptrends. However, this is easier said than done because several traders sell too early out of fear and others keep waiting for the dip.

This is where the double Bollinger Bands can come in handy. Its use has been popularized by Kathy Lien, the managing director of FX Strategy for BK Asset Management.

To construct the setup, traders use the default value for the first Bollinger Bands. For the second Bollinger Bands, keep the value of the moving averages the same at 20-day SMA but reduce the value of the standard deviation of the outer bands to 1.

As shown above, in an uptrend, the aim is to buy when the price trades between the upper band of the first and second Bollinger Bands.

There are several entry opportunities possible and a trader would wait for the price to close between the upper bands for three successive days before buying because this can help to avoid unexpected whipsaws.

Traders can keep the initial stop-loss below the middle band but quickly trail it higher to reduce the risk and protect profits. One of the possible exit strategies would be to sell on a close below the upper band of the Bollinger Bands with one standard deviation.

The chart above shows how the strategy is used. Traders may have entered on Dec. 19, 2020, and remained in the trade until the stops hit on Jan. 11, 2020. Another buying opportunity arose on Feb. 7, which finally hit the stops on Feb. 23.

This strategy should be avoided when the price is oscillating in a range and to improve the odds, traders could only open new positions when the price breaks out of a stiff overhead resistance.

Key takeaways

The Bollinger Bands can be a good tool to aid traders in identifying a trend early by spotting the volatility squeeze, which is usually followed by an expansion in volatility and a trending phase.

Even if a trader missed buying early, the Bollinger Bands can be used to join the trend during pullbacks with a low-risk entry opportunity.

The indicator can also come in handy for trading a strong trending phase where corrections are shallow.

There are many different ways to use the Bollinger Bands and this article just provided a few guidelines that traders can explore.

4 ways investors use support and resistance levels to make better trades

June 28, 2021 Coin Telegraph

Coin Telegraph

Properly identifying support and resistance levels can be the difference between a winning trade and significant losses.

Trading should just be a simple process of buying low and selling high but for many investors the process is more akin to rocket science. One of the most basic and easy-to-understand strategies that can help accomplish this is to identify an asset’s support and resistance levels.

Once traders can spot the support and resistance levels, they can improve their entry and exit timing in the market. Support and resistances are also helpful during bullish, bearish and range-bound markets.

Let’s take a moment to understand the basics.

What are supports?

Support is formed at a level where the demand from the buyers absorbs the supply from sellers, preventing the price from declining further. At this level, the bullish traders are inclined to buy as they believe the price is attractive enough and may not decline further.

On the other hand, the bears stop selling because they believe the market has fallen enough and may be due for a rebound. When both these situations occur, a support is formed.

*EOS/USD daily chart. Source:* *TradingView*

The above chart is a good example of a strong support. Every time EOS price drops to the $2.33 level, buyers emerge and the selling reduces. This causes demand to exceed supply, resulting in a rebound.

Although horizontal supports are considered to be more reliable, they are not the only way supports are formed. During uptrends, trendlines act as supports.

Litecoin (LTC) started its bull run in December of 2020. Thereafter, the price rebounded off the trendline on several occasions. This happened because when the price neared the trendline, the bulls purchased, believing that the LTC/USDT pair had reached attractive levels to buy.

At the same time, the counter-trend traders stopped selling, assuming that the near-term may be oversold. Both these occurring at the same time caused the correction to end and the uptrend to resume.

What are resistance levels?

Resistance can be considered as the opposite of support because it is the level where supply exceeds demand, halting the up-move.

The resistance is formed when buyers who have purchased at lower levels start to book profits and the aggressive bears start shorting as they believe the rally is extended and ready for a pullback. When supply exceeds demand, the rally stalls and reverses.

The support or resistance does not need to be a single level. The above chart shows how the area between $10,500 to $11,000 acted as the resistance zone. Whenever the price reached this zone, short-term traders booked profits and aggressive bears shorted the BTC/USDT pair. Between August 2019 and July 2020, the pair turned down from the resistance zone on five occasions.

Similar to support, the resistance line or zone does not need to always be horizontal.

*ETH/USDT daily chart. Source:* *TradingView*

During the decline from May 6, 2018, to July 4, 2018, Ether (ETH) rallied to the resistance line, also called the downtrend line, but turned down from there. This is because traders who had a bearish outlook used the rallies to initiate fresh short positions as they anticipated lower levels.

At the same time, aggressive bulls who purchased on sharp dips closed their positions near the resistance line. Hence, the line acted as a wall and the price turned down from it.

Identifying support and resistance during consolidation phases

When the support and resistance are clearly defined as in the EOS/USD pair above, traders can buy on a rebound off the support and wait for the price to rally near the resistance to close the position. The stop-loss for the trade can be kept just below the support of the range.

Several times, professional traders may try to hunt these stops by pulling the price below the support of the range. Therefore, traders may buy on the way up and also wait for the price to close decisively below the support before dumping their positions.

Trading supports in an uptrend

When an asset takes support on an uptrend line three times, traders may expect the line to hold. Hence, long positions can be taken on a bounce off the uptrend line. The stops for the trade can be kept just below the trendline.

However, in an uptrend, the break below the trendline does not necessarily mean that the trend has reversed. Many times, the trend just takes a break before resuming again.

As seen in the chart above, the ETH/USDT pair took support on the uptrend line on several occasions. However, when the pair broke below the uptrend line, it did not start a new downtrend. The price consolidated in a range for a few days before resuming the up-move.

Traders may close their long positions if the price dips and sustains below the uptrend line but new short positions should be avoided. If the price resumes its uptrend after consolidation, traders may again look for buying opportunities.

Resistance flips to support

When the price breaks out of a resistance, the bulls try to flip the previous resistance into support. If that happens, a new uptrend begins or resumes. If this happens several times, it may offer a good buying opportunity.

Bitcoin was stuck between the $10,500 to $11,000 zone from August 2019 to July 2020. After the breakout from the resistance zone, the price again dropped below $10,500, but the bulls bought the dip aggressively, flipping the level into support. This offered a good buying opportunity to traders as the new uptrend was just getting started.

Support flips to resistance

*DOT/USDT daily chart. Source:* *TradingView*

Polkadot’s (DOT) chart above shows how the zone between $28.90 to $26.50 was acting as a support zone from Feb. 14 to May 18 of this year. However, once the bears pulled the price below the support zone, the zone flipped over into resistance and has not allowed the price to break above it since then. This is an instance where a support zone turned into a resistance.

Key takeaways

While analyzing any coin, traders must look for support and resistance levels as they can act as good entry and exit opportunities.

In an uptrend, traders should look to buy at support levels and in a downtrend, traders should look to short at the resistance line.

Support and resistance levels are not set in stone and professional traders will try to hunt for stop orders. Hence, traders should keep the stops such that they do not get run down by the market makers.

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