The support zone is a price zone that is hit when the price of a cryptocurrency falls to a predicted price known as a support level. There are many ways that traders use to identify such a zone. Through technical analysis, they are able to do so easily. In simple terms, the support zone is shown on the chart as a low that the cryptocurrency has not previously fallen under. This zone is often characterized by low volume and with a demand that is outweighed by supply. Moreover, the support zone is often located around a support trendline.
There are numerous tools, techniques, and systems that traders use to identify, understand and predict a support zone. One popular charting technique is called ‘envelope channels’. With this indicator, traders can visualize the support and resistance trendlines with two standard deviations around a cryptocurrency’s price moving average (MA).
One defined system traders use to identify any trading indicator while in the support zone is the Fibonacci Retracement. This method works while analyzing sideways, ascending, and descending channels – it is built around those. The lines in the middle drawn throughout the chart are what aid a trader to identify zones for trading easier.
Also Read: Candlestick Meaning – What is a Candlestick?
Takeaways
- The support zone is a zone when a cryptocurrency’s price falls not lower than predicted.
- Envelope channels is a charting technique that helps traders understand indicators in the support zone.
- Fibonacci Retracement is a defined system that traders use in order to identify trading indicators in the support zone.