How to conduct technical analysis of cryptocurrency

How to conduct technical analysis of cryptocurrency

Contents of this article:

Technical analysis of cryptocurrencies is one of the most popular tools for traders. It allows you to determine the movement of the rate based on the dynamics for a specific period, as well as determine when it is worth opening a position. Investors choose fundamental analysis, it helps them decide whether to buy or sell cryptocurrency . Traders earn money from the difference in rates, they can earn both by buying and selling an asset, the main thing is to determine the optimal time to open a position.

Why is cryptocurrency technical analysis actively used by traders?

The objectivity of the results of technical analysis for the cryptocurrency market can be called quite high, since most of its elements are measured and expressed in algorithms and mathematical formulas. Moreover, this type of analysis even takes into account the psychology of the market. Traders trust him because of his efficiency, although he cannot 100% predict the further movement of the asset’s value.

Some experts have criticized this type of analysis as a self-fulfilling prophecy. When market players see the same data on the chart, they simultaneously make thousands of transactions with the same direction, as a result, the asset price rises, justifying the analytical forecast. Others believe that the course has no memory, so it is not worth predicting the change in the value of the crypt based on past quotes. However, the method works by helping traders improve the efficiency and profitability of trading.

Fundamentals of cryptocurrency technical analysis

The main information for technical analysis of cryptocurrencies is the cost of the crypto on the trading platform and the volume of transactions made with it. It is on the price with the help of a number of tools that a forecast is built for further dynamics and a search for the time to enter a deal.

Three main principles of technical analysis on the cryptocurrency exchange:

  • All data is already included in the price. Experts believe that the value of the coin has already taken into account all external and internal factors that affect quotes.

  • The course does not move by itself, it follows the trend. The trader needs to see the emerging trend in time and join it. A trend that is gaining strength is likely to continue to develop, and the price movement will depend on it.

  • The dynamics are repeated. People tend to perform the same actions in certain situations, which means that when certain conditions develop in the market, traders behave in the same way, and the history of price movement repeats over and over again.

Basic methods of technical analysis of the cryptocurrency market

To study the price, charts, indicators, figures are used. To understand how to conduct technical analysis on a cryptocurrency market, you need to get acquainted with its methods.

The classical method is based on graphs. They reflect a brief history of the course and the main behavior patterns of market players. On the charts, you can find trading ranges, determine the current trend, and see signs of an imminent price reversal.

Another method is algorithmic or mathematical. Today, it is the most popular cryptocurrency technical analysis option for beginners and professionals. The analysis is carried out through indicators that help to notice the growing trend in the early stages in order to join it and earn. Indicators are able to determine the beginning and end of a trend, as well as its reversal. Moving averages are one of the most common indicators. For example, if today the value of this indicator is higher than yesterday, the uptrend intensifies in the market.

Candlestick analysis is another option for studying the current market situation. Candlestick charts can be used in combination with other tools, they work well for different assets.

We briefly talked about popular methods of analysis, but it is worth delving into each of them in detail, understanding the features, advantages and disadvantages. It is important for a novice trader to learn the technical analysis of cryptocurrencies , mastering it from the basic rules and the most popular tools. On a trading course Crypto Crew you will gain the necessary knowledge and skills, and in our community you will find even more useful materials to study.