Any kind of trading whether in forex, commodities or cryptos, requires adequate planning and a proper strategy. Traders must keep track of a crypto’s previous movements, its highs and lows over a specific time frame, and use the same to predict future movements and make trading decisions.
Now, one may ask that when the crypto markets operate 24/7, what do we mean by the highest or lowest prices for the previous session? When we refer to high and low valuation of say Bitcoin we mean the highest and lowest price in the previous session of 24 hours. On the other hand, if the trading strategy is based on a different timeframe, say a week or an hour, then the highest and the lowest values need to be sought within the respective time period. Let us find out more about how the previous session’s highs and lows are important and things to remember when finalising an investment strategy.
The previous session’s high and low values provide a good idea about the direction of a cryptocurrency’s movement during a specific timeframe and the sentiment prevailing in the market during that period. One can analyse the factors that could have contributed to the highs and lows and check its continuation or impact in the near future too. So, any strategy to trade in cryptos must take into account the previous session’s high and low points.
Several technical indicators make use of the previous session’s levels to help traders predict future direction. These indicators do not analyse fundamental factors and instead focus on only short-term movements, such as over one day, one hour, four hours, etc. In contrast, long term investors who wish to buy and hold would prefer to be know the fundamental factors affecting a crypto’s valuation too.
Now, a Stochastic Oscillator is one indicator that helps traders to know how strong the current market trend is by considering a specific time period and comparing the present price to the highs of the previous or a specified session. This strategy is based on the idea that in a bullish trend, prices will close near their high for the period and in a bearish trend, it will close near the low. The oscillator moves between 0 and 100, with the threshold for oversold being 20 and overbought being 80. In case of a STOCH of 20 or less, the concerned cryptocurrency is being oversold or sold below its true value. Similarly, a STOCH of 80 or more means that the cryptocurrency is being overbought.
Before chalking out a trading strategy for cryptos, remember a few important points:
Similar to forex, cryptocurrency trading can also be done by identifying High/Low Breakouts and identifying the support and resistance levels. And, when the price of a cypto approaches the previous session’s high or low, it is important to study the factors impacting such movement before you can make a trading decision. This will also help you identify the direction of future price movement.
If you liked this educational article please consult our Risk Disclosure Notice before starting to trade. Trading leveraged products involves a high level of risk. You may lose more than your invested capital.