3 Key Trendline Strategies That Spotted BTC's 127% Surge in 2021 for Investors

In 2021, Bitcoin saw a remarkable 127% rally in just 30 days, underlining the importance of trendlines in trading.

In this post I’ll be sharing with you why trendlines are one of the most underrated trading tools you can use for your crypto investing.

Mastering trendlines could be your key to making smarter trading decisions in a market where a single trendline can represent the difference between profit and loss.

Let's make some money.

Enjoy!

Kierin | Onchain_Edge

Here's a snapshot of what we'll cover:

→ Trendlines Overview: What trendlines are and the psychology behind them.

→ Understanding and Applying Trendlines: Techniques for drawing trendlines and analyzing market momentum.

→ Strategies and Patterns: Advanced strategies and key patterns like the Wedge and Bump and Run.

→ Practical Insights and Tools: Real-world applications and an introduction to a helpful TradingView trendline indicator.

Mastering Trendlines

Trendlines are simple yet powerful tools in technical analysis. They are straight lines drawn on price charts, connecting price points.

A trendline's primary purpose is to illustrate a trend's direction, whether an uptrend or a downtrend.

Drawing trendlines correctly is crucial as they provide valuable insights into market behavior.

Psychological and Sentimental Aspects of Trendlines

Trendlines reflect price movements and encapsulate market psychology and investor sentiment.

They act as visual representations of the collective mindset of the market participants, often indicating potential price movements across various timeframes.

Many traders and investors closely observe trendlines, making them a self-fulfilling prophecy.

Trendlines Act as Support and Resistance

In technical analysis, trendlines are invisible barriers that create support and resistance levels.

These levels are crucial in determining entry and exit points in trading. A strong trendline often prevents the price from breaking through, acting as a barrier.

Drawing Trendlines in Uptrends and Downtrends

In uptrends, trendlines are drawn by connecting higher lows,

whereas in downtrends they are formed by connecting lower highs.

Choosing Between Wicks and Bodies in Trendline Drawing

Traders debate whether to draw trendlines using candlestick wicks or bodies.

Traders choose between candlestick bodies or wicks based on strategy and market conditions.

Without drawing the trendline through the candlestick body, I look for the most contact points.

Validating Trendline Strength

A trendline is considered strong and valid if it touches the price points at least three times.

Pro Tip:

Advanced trendline strategies involve analyzing different timeframes. Generally, a trendline on a higher timeframe is more reliable than one on a lower timeframe.

Therefore, this hierarchy of timeframes significantly influences trading strategies.

Trendline Angle Analysis

The slope or angle of a trendline is a key indicator of trend strength.

A steep angle indicates rising momentum in an uptrend, often leading to euphoric market stages.

Above 40°, things start heating up.

The market is in the euphoria stage.

13° → 29° → 43° → game over

On the other hand, when the downtrend has a low angle, there is a greater possibility of a bullish reversal.

The closer a downtrend angle gets to 0, the more likely a breakout.

-60° 🥶 → -51° - 11° → breakout

You can check the angle of a trendline like this.

Draw the trendline > click on it > go to settings > check the angle box.

Strategy 1: Trendline Patterns: The Wedge

The Wedge pattern, formed by converging trendlines, indicates market consolidation.

The angles of the trendlines in a Wedge pattern can offer clues about the market's future direction.

In the rising wedge, the lower trendline acts as a support and the upper trendline as a resistance.

Strategy 2: Bump and Run Pattern

The Bump and Run pattern is a significant pattern of potential market reversals.

Bullish bump and run example

Buy after the bump (risky) or after the trendline breakout.

This pattern is characterized by a sudden and rapid change in the trendline’s direction, often signaling a shift in market sentiment.

Bearish bump and run example

start taking profit after the bump at the next major resistance.

Strategy 4: Bullish and Bearish ‘Kiss & Bounce Off’

Bullish Kiss & Bounce-Off

In bullish scenarios, strategies like the 'kiss and bounce off' can be effective, where traders wait for a breakout above the trendline and then buy.

Wait for a breakout above the trendline→ Buy the retest or the next green candle.

Bearish Kiss & Bounce-Off

Selling the recovery into resistance can be a prudent strategy in bearish scenarios.

A break below the trendline → sell the recovery into the resistance.

This strategy saved a good chunk of my portfolio in 2022.

You could have sold $BTC at $52k in 2022.

Trendline Buy & Take Profit Example

Applying trendline strategies in real-world trading scenarios can be highly beneficial—a good strategy for using trendlines to find buying opportunities.

Bonus: TradingView Indicator for Trendlines

TradingView offers an indicator that helps in identifying missed trendlines.

While manually drawing trendlines is crucial, utilizing tools can provide additional support and accuracy in analysis.

Conclusion

Trendlines play a crucial role in cryptocurrency trading. They help to visually represent market trends, leading to a better understanding of market psychology, and identification of significant entry and exit points. By mastering the art of drawing and interpreting trendlines, one can significantly improve their ability to navigate the unpredictable cryptocurrency markets.

Cheers,

Kierin