Technical analysis of the cryptocurrency market

Technical analysis of the cryptocurrency market

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The main reason for the change in the price of a cryptocurrency is the ratio of supply and demand. For traders who make money on exchange rate fluctuations, it is important to open a deal on time in order to get the maximum possible profit. Technical analysis helps to find an entry point and predict in which direction the price of an asset will move. This is one of the main methods of market research for making trading decisions .

Why does a trader need a technical analysis of the cryptocurrency market?

Technical analysis is a set of tools for predicting the likely movement of the course. The forecast is based on the pattern of price changes over a certain past period in similar circumstances. The analysis is based on the price chart and the order book.

Technical analysis in the cryptocurrency market includes different types of charts to display the price in the past and its changes. The method is based on mathematical and statistical calculations.

Important! Technical analysis does not indicate the reasons for the change in the course direction, it only takes into account the fact that the price moves within a given interval. Price levels, such as highs and lows, are important in this case.

Graph types

As one of the tools for technical analysis of the cryptocurrency market charts are used. There are several types of charts:

  • Linear. The easiest to understand, especially for beginners. On it, quotes are connected by one broken line. This type of graph is used for superficial analysis, professionals use it as an additional, and not the main one, since it does not provide detailed data.

  • Candle. Candles consist of quotes for a certain period specified by the analyst in the settings. On the candlestick chart, you can see how the price has changed for 5, 15, 30 minutes, for an hour, day, week or month. The candlestick chart is called the most popular, as it is informative. Such a chart shows the price of an asset at the beginning of the analyzed period, the price at the end of the period, the maximum and minimum value of the asset for the specified period.

  • Bars. In such a chart, you can also track the opening and closing prices, the maximum and minimum values for the specified period. But the chart itself differs from the candlestick in appearance, it is a vertical line with notches on the left and right, which indicate the opening and closing prices, respectively. The range of price changes is marked above and below the line.

Methods of technical analysis in the cryptocurrency market

There are several methods in technical analysis, each of which differs in tools and mechanism. These are graphical, candlestick, indicator and volume analysis. The basis of technical analysis is called indicators, which are algorithms created using mathematical formulas. The trader chooses indicators on the exchange itself, they are represented by lines of different types, reflecting quotes for the selected past period. Indicators help to visually determine the most suitable points for opening deals, as well as assess the strength of the trend.

The graphical method involves the study of charts and the detection of figures on them, consisting of Japanese candlesticks. Figures indicate the continuation of a trend or a price reversal. There are also figures of uncertainty, they appear when the trend has not yet formed, and it is impossible to determine where the rate will move. The candle method is similar to the graphic method, but it is more detailed.

Volume analysis is based on special indicators, such as OBV. This indicator links exchange rate changes with trading volume. A trend is confirmed when the trading volume increases as the price rises or falls. A large volume of operations means that traders are interested in the asset. When the trend is confirmed, the trader can join and earn, but if the trend is not confirmed, transactions are considered more risky.

Analyzing the market and making a forecast is difficult, especially for beginner traders. Get trained technical analysis of the cryptocurrency market V Crypto Crew and join our community to know more! We will teach you how to properly use analysis tools to obtain the most accurate data and find profitable entry points to the market.