EDUCATION - Types Of Confirmations 📚When trading, it is important to have confirmations. Confirmations are when price moves in a a particular way which tells us that our setup is valid and even, ready for entry.
We have 3 main types of confirmations.
1. Trendline Break
This confirmation is very simple yet very effective. When price is following a trend, you can often find that there's a trendline that can be placed. This trendline is used as a guide.
eg. When price stays below the trendline = bearish
when price goes above the trendline = bullish
Entry Method: Entry on break of the trendline with stops below the lowest price before the break
2. Break of structure
Price tends to test and respect significant price points.
e.g. We can draw a structure level when price rejects a certain price point and assume that when price stays below that level = bearish
When price breaks above that structure level = bullish
Entry Method: Entry on break of structure OR retest of that structure level
3. Moving Average Cross Over
Using 2 moving averages can help you ascertain whether price is bullish or bearish. In the crypto market, the 100 and 200 moving averages are often used.
eg. When the 100 moving average is below the 200 moving average = bearish
When the 100 moving average is above the 200moving average = bullish
Entry Method: Once there's a bullish cross over (100 over 200), we can assume price is bullish. We can look for pullbacks for entry
COMBINATION
Confirmations can be most reliable when more than one is used at the same time e.g. trendline break and break of structure.
Please note that these types of confirmations work with ALL market, whether it is Crypto or Forex.
See below for various examples of using confirmations when entering the market, particularly the crypto market.
BITCOIN
ETHEREUM
LITECOIN
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