Theory of price support levels

[mikege00]

Hi,

I came across an article in Coin Telegraph today mentioning a potential support level for BTC.
Is there any theory of psychology or trading theories that explain support levels besides technical analysis? Any resources that I can look into to understand it better?

See the quote from the article below:

In the near term, based on market orders and on-chain levels, the analysts said that the $15,170 area would likely emerge as the new support area. The firm found that 860,000 addresses bought 465,000 BTC near that level, which would mark it as critical support

-https://cointelegraph.com/news/bitcoin-price-at-16k-and-beyond-here-are-the-bear-and-bull-cases

[GreatArkansas]

"the analysts said" these kinds of words for me are not really accurate and it's difficult to know. They are using some of their own models to tell and analyze the market for sure, it's still the same using charts and analyzing it with some indicators or tools. They are using Bitcoin addresses this time which showing the in and out of Bitcoin for every addresses.
Upon checking the article of cointelegraph, the sentence you quoted got a Twitter link: https://twitter.com/intotheblock/status/1327208198701522944/photo/1

[exstasie]

Is there any theory of psychology or trading theories that explain support levels besides technical analysis? Any resources that I can look into to understand it better?

Traders tend to cluster orders near past pivot (reversal) levels. For example, bears will layer short sell orders below a previous pivot to maintain a downtrend of lower highs. This supply serves as resistance.

On the other hand, after that resistance is breached to the upside, then it will generally become support. This is because of all the bears trying to buy back at break-even, after shorting or selling at the old resistance. They provide demand that absorbs all the available supply at that level.

There are other ideas out there, like the round numbers theory:

They’re created by traders putting their stop loss and take profit orders at round number prices, prices in the market which end with either 00 or 000. When the market reaches one of these prices the bank traders tend to enter trades or take profits (as these both require there to be orders present), which causes the price to reverse and start moving in the opposite direction.

https://forexmentoronline.com/understanding-support-and-resistance-levels/

[buwaytress]

In the near term, based on market orders and on-chain levels, the analysts said that the $15,170 area would likely emerge as the new support area. The firm found that 860,000 addresses bought 465,000 BTC near that level, which would mark it as critical support

I was about to disagree, until I saw that this was just "near-term", which for me really just means a max period of 2 to 3 weeks. In which case, I agree. 15k for it to be a strong support level would have to hold for much of the next few months, and then surface on the 200MA mid next year.

Also, that's not a lot of BTC. Probably many more times that off-chain and in derivatives. Which is where the real profit margins will be calculated.

[Vispilio]

The firm found that 860,000 addresses bought 465,000 BTC near that level, which would mark it as critical support[/i]

This is a pretty weak statement, for every buyer there is also a seller. If the study assumes these are net buyers based on a net entry of BTC in 860,000 BTC wallets, those owners can have cumulatively 5-10 million more BTC wallets where the exact opposite is going on, etc...

Open interest is more indicative on derivatives markets, but almost all correlations and "critical support / resistance" levels can break given enough momentum, so at best it should be be a tentative factor in your decision making...

[tranthidung]

Supports are not permanent supports. By that I meant supports can be flipped and turned to be resistances. Supports and resistances flip over each other all the time.

Supports and resistances can be seen on charts but don't forget the important factor: volume. You can not identify a support or resistance without good strong signal from trading volume. Also check VPVR indicator. You can not use this indicator with Trading view for free account.

Bitcoin Support and Resistance for dummies (Husires has a good thread).

[Husires]

Analytics that track price movements are analyzes that try to attract customer opinions and thus will not be true.
If you want to track the analyzes, build yourself an idea around the levels of support and resistance and predict the behavior of prices. Follow the news and try to find a logical link between the news and the results you get from the analyzes.

if you want to learn basics of support levels read my topics on Trading Discussion:

Trading Discussion:
- Position Size for dummies
- VWAP for dummies
- Bitcoin Support and Resistance for dummies
- [Tutorial] Golden cross VS death cross
- Merkle Trees and Merkle Roots for dummies
- Elliott Wave Theory for dummies

[justdimin]

Well there is certainly a support level theory and it is certainly used by many traders, there is no denying that. However, we are in crypto world and there are tons of rich people who are rich in bitcoin because they bought a ton of bitcoin very early who could sell as much as thousands of bitcoins all at once and destroy the market creating this huge FUD that would cause it to drop even further.

Now this is not something that frequently happens, but it is a thing that "potentially" could happen. Remember late 2018? BCH and BSV was in a war and Craig sold as much as 15k+ bitcoins just to cover BSV cost and what happened? Bitcoin that had a VERY VERY STRONG 6.3k level dropped to 3k. Support levels can be broken very easily if a rich enough person wants to break it.

[ChrisPop]

Never base your decisions based on media. A lot of them are probably artificially engineered by different institutions. It is ok to check what other analysts perspectives and opinions, but when you're making a financial decision you want to base it on your own due diligence and assume responsibility for it. Don't blame that analyst if the support level does not hold. It was only YOU that took the decision to invest.

Support levels are important technical levels that signify and agglomeration of buy orders. That doesn't mean they can't be broken.

As an advice - you can check the volume on charts to see at what levels there is more support or resistance.  

[palle11]

Support levels are important technical levels that signify and agglomeration of buy orders. That doesn't mean they can't be broken.

At all times, support can be broken and it turns to resistance. New traders can get confused with the airport and resistance when they change. However, they can hide the trader if it doesn't get broken down might be change of sentiment.

[judaspriest]

In my opinion, the price of support is very easy to determine, but the theory is a little complicated,
I will provide a theory that is easy to understand, support for prices is determined according to historical prices,
if you look at the chart and compare it with the previous chart, and draw a line from below.
then fit it down the present valued candle, that's a support. you understand?

[chip1994]

Hi,

I came across an article in Coin Telegraph today mentioning a potential support level for BTC.
Is there any theory of psychology or trading theories that explain support levels besides technical analysis? Any resources that I can look into to understand it better?

First, we need to understand the support zone is where investors are willing to buy BTC in large volumes. So why are there such support areas?
Actually it is the support created by the psychology of traders. Support zones will usually have very large volumes and are right there is a struggle for interest between Bear and Bull.
it was the volume candles that showed the consensus of the crowd about that price. so the good traders often pay a lot of attention to volume + more indicators can recognize it as strong or weak support.

[LUCKMCFLY]

There are many theories of trading, in short-term trading many resistances and supports usually appear, but in my opinion, according to each analyst, they interpret their resistance or support.

I call the resistances areas of opportunity, for me the only support or ceiling is $ 20k, the whales always choose some price limits to make their purchases to test offer, if the offer is very large they wait until there is not much to keep increasing, it's basically what I interpret as bulls.