Alan Solarsh shows how price tends to bounce between moving averages on Bitcoin charts. Using an 8-period red line and 34-period yellow line, he demonstrates that price "hugs" each average before breaking through to the next one, creating predictable support and resistance levels.
Alan Solar, the passive income guru, in this video tutorial explains to you how the other moving averages work and why the price reacts in certain ways to these moving averages.
So on the screen you can see the phone settings of the different moving averages. We've already set the phone up to have these moving averages. You already know that we use the candlestick analysis and the 8 exponential moving average and the stochastic indicator to make our basic decisions of when, when to enter and when to exit the trade. Those are the, those are the indicators that you use when you want to enter an exit only. Okay. The other moving averages are there to show you, okay, why the price is behaving in such a manner as this is going to absolutely astound you. It freaks me out every time I watch the chart and see the price behaving the way it's behaving. So let's have a look at.
A chart and you'll notice that the price generally.
Seems to hug these moving averages. It seems to hug these moving averages. And then when it gets to a certain specific moving average, it either touches the moving average and then retraces. That's the one thing that it does. And if it does break through the moving, the moving average, it will then go to the next moving average. It will either touch that moving average and then retrace back to another moving average. And if it actually goes through that moving average, then it will go to the next moving average, which is absolutely astounding. It's hilarious to watch. So let's, let's change our chart to a bitcoin chart because that's what's working on the weekend and I'm recording this on the weekend. So let me just add the bitcoin chart to my phone. Right. So I've got a one minute chart over here. And as you can see, there's a little bit of chaos with the price of the currency and it seems to be hugging these, these three moving averages. Now, in my opinion, what's going to happen here because the, the price is actually opened below the red 8,8 exponential moving average, we can expect the price to go down to the yellow if it, if, if it. What is possibly going to happen is because we don't predict what's going to happen, but we use the moving averages, the 8 exponential moving average and the candlesticks to give us.
A better advantage, a super advantage over everybody else. And we can then tell what's going to happen with the currency. So as you can see, we're below the 8 exponential moving average and I think that the price is going to come down to the yellow. It's either going to go to just a little bit above to this red over here because this is where the support is. If it does break this, this line over here, then it will go up. So at the moment the price opens, if we can just see the price actually opened above the 8 exponential moving average. Sorry, so I'm incorrect. So you can expect the price to go up. It will go up to about here and then it will then retrace back to the 8 exponential moving average. If it breaks this 8 exponential moving average, it will go down to the yellow. Okay. It will stop on the yellow and then it will retrace back to the support line over here. If it breaks below this yellow line and the yellow line, as far as I know, is the 34 on this chart, it will then go down. If it breaks the 34, it will go down to over here. So as you can see, check it out. Check what's happening. So let's just draw a line. I'm not sure if you can hear this video because it is hailing outside, but check it out. That's the line that's as high as it's gone.
In the last couple of minutes. We're not expecting it to break through that line at all. So this is again on a one minute time frame, which will basically give you like an idea, okay, of how these, how these moving averages react. So let's wait for the year, for the currency to do its thing and hopefully you'll see that the price will hit this, It'll hit that line. Okay, gone above the line. So let's go and check it out. Possibly it's going to retrace back to the 8 exponential moving average. As you can see, it's coming back down again. Okay, so it hit that. This line over here we call the line of resistance.
So it's gone up a little bit. Let's look to see, let's put in another line. We always look left to see the history of what's going on. So.
The next point, if you look back in the chart, we always look for points of support and point of resistance. Okay, so let's go and put some lines in to understand where the chart where the price could possibly go in this time frame. So let's expand it now. Okay, now we have our points of support and resistance. And this will give us an advantage and it will tell us exactly what's going to happen with this chart. So in the stochastic we're in an almost in an overbought position, which is telling the other traders that it's now time to get into a short position. Okay, now the further we are away from the 8x position exponential moving average, okay, we know that the price has more of a chance to retrace back to the 8 exponential moving average. So the further the price is away from the 8 exponential moving average, the bigger the chance is of it retracing back to the 8 exponential moving average. So let's minimize it and see what happens. So the price came to a high of just below the white Bollinger band. The Bollinger band also acts as a line of support and resistance.
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