0%

Bitfinex Trading 101—Understanding Consolidation & The Polarity Principle

2021年8月27日 4分读完
新闻文章的横幅图片

Bitfinex Trading 101 series brings you educational content around crypto trading and the Bitfinex platform that will enrich your trading knowledge.

What is consolidation in trading?

Consolidation is a period when the price of an asset is moving within a limited range, or more familiar as sideways price action. In this period, the price direction is unclear as it doesn’t show any significant advancement in either upward or downward trends. One of the easiest ways to identify a consolidation period is when both support and resistance lines can easily be drawn on the price chart for that particular price movement period.

A consolidation period could last for minutes, hours, days, weeks, even months. Professional traders tend to use this period to assess the market and watch for any possible breakouts above the resistance level or below the support level. Some traders may decide to time out from their trading activities as there’s often less room for profit due to the tight range movement. Some others, however, may continue to trade with extra cautious and different strategies.

Why and when does a consolidation period take place?

There isn’t a definitive answer on why a consolidation period occurs, as it’s impossible to truly know what is happening with the market and why.

A consolidation period could take place in an uptrend or downtrend. It can be a trend continuation formation, which signals an extension of the preceding trend or a trend reversal formation, which signals a change from the preceding trend. In some instances, however, a consolidation period doesn’t lead to a breakout either way.

The Polarity Principle: The dynamic between supply & demand

The price movement of an asset is heavily affected by the dynamic between demand/buy and supply/sell of the asset in the market. However, there are times when the market has completely absorbed the buying or selling efforts. When this happens, a significant shift in the market sentiment usually takes place.

As mentioned in the support and resistance content, a support level is formed when demand is strong enough to keep the price from dropping further. But when the buying pressure behind a support level is fully absorbed by the market, traders are no longer interested in buying at this price level. This causes a major shift in the market sentiment. As a result, a support level will turn into a resistance level.

On the other hand, a resistance level is a level to which price has ascended yet struggled to break above. At this level, the selling pressure is strong enough to keep the price from climbing further. But when the selling behind a resistance level is fully absorbed by the market, traders no longer see it as an optimum point to take profit, rather as a good entry point due to the disappearance of the selling pressure. As a result, a resistance level will turn into a support level.

The Polarity Principle refers to the major shift in the market sentiment caused by a change in the dynamic between supply and demand of an asset.

Sign up to Bitfinex newsletter or subscribe to Bitfinex’s YouTube channel for more insightful content.

The post Bitfinex Trading 101—Understanding Consolidation & The Polarity Principle appeared first on Bitfinex blog.

热门新闻

How to Set Up and Use Trust Wallet for Binance Smart Chain
#Bitcoin#Bitcoins#Config+2 更多标签

How to Set Up and Use Trust Wallet for Binance Smart Chain

Your Essential Guide To Binance Leveraged Tokens

Your Essential Guide To Binance Leveraged Tokens

How to Sell Your Bitcoin Into Cash on Binance (2021 Update)
#Subscriptions

How to Sell Your Bitcoin Into Cash on Binance (2021 Update)

What is Grid Trading? (A Crypto-Futures Guide)

What is Grid Trading? (A Crypto-Futures Guide)

马上免费使用Cryptohopper进行交易!

免费使用——无需信用卡

开始吧
Cryptohopper appCryptohopper app

免责声明:Cryptohopper并非受监管机构。加密货币的机器人交易存在大量风险,过去的业绩表现并不能预示未来的结果。产品截图中展示的利润仅供参考,可能有所夸大。只有在您具备充足的知识或寻求了专业财务顾问的指导后,才应进行机器人交易。在任何情况下,Cryptohopper均不对任何人或实体因使用我们的软件进行交易而产生的全部或部分损失或损害,或任何直接、间接、特殊、后果性或附带的损害承担责任。请注意,Cryptohopper社交交易平台上的内容由Cryptohopper社区成员生成,并不代表Cryptohopper或其代表的建议或推荐。市场上展示的利润并不能预示未来的结果。使用Cryptohopper的服务即表示您承认并接受加密货币交易的固有风险,并同意免除Cryptohopper因您的任何责任或损失的责任。在使用我们的软件或进行任何交易活动之前,务必审阅并理解我们的服务条款和风险披露政策。请根据您的具体情况咨询法律和金融专业人士,获取个性化的建议。

©2017 - 2024 版权归属于Cryptohopper™ -版权所有。