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Technical analysis in the cryptocurrency market is associated with the price chart, it is based on the search for patterns to determine the future rate of the asset. Experienced traders can read the chart, use it to find suitable entry points to the market and increase their efficiency by making profitable trades. What is technical analysis and what methods it includes, we will tell further.
What is technical analysis?
Technical analysis is an attempt to calculate the cryptocurrency market, to determine the further dynamics of the price of an asset. It is based on the mathematical processing of previous price knowledge and forecasting. All this traders do with the help of algorithms, indicators, figures and lines – tools that interpret the course chart. Using these elements allows you to turn a set of prices into a structured picture that a trader can navigate and plan.
Technical analysis of cryptocurrencies for beginners can seem like a rather complicated process, as it involves a large number of charting tools. To learn how to analyze the current situation on the market and make the most accurate forecasts, a beginner should consistently study the main technical analysis tools and practice working with them.
Fundamentals of technical analysis in trading
Understanding the basics of technical analysis of cryptocurrencies , a beginner should pay attention to its basic principles. These are a few rules:
All information is included in the price. Traders who actively use technical analysis believe that all external and internal factors affecting quotes are already included in the current rate. It is impossible to calculate the future price of a cryptocurrency without knowing the current value and the history of the course for a certain time.
The direction of the course is set by trends. Despite the fact that the rate of cryptocurrency assets depends on supply and demand, the price does not move chaotically, there are always reasons for changing the rate. The more obvious these reasons, the brighter the trend in the market stands out. A trend is formed according to a simple principle – if there are offers, an asset is bought, if there is a demand, it is sold.
The course movement is repeated. When the market situation worsens, traders tend to sell the asset as quickly as possible, and vice versa. An uptrend is always followed by a downtrend.
The technical analysis method is applicable to any assets. Some assets lend themselves better to this type of analysis, others worse, but trends are formed in all financial markets, asset prices are looking for support on the decline and resistance on the rise.
Main methods of technical analysis
Cryptocurrency technical analysis training should include familiarity with all of its tools. But first you need to understand the methods, there are several of them:
Graphic. Studying the chart and searching for figures in it, consisting of Japanese candlesticks, gives the trader a signal about a change in the course dynamics or a continuation of an already existing trend in the market.
Candle. Japanese candlesticks, which are one of the main figures for analysis, provide a more detailed picture of market sentiment than the previous analysis method. By studying their position, closing and opening levels, a trader can determine the best entry points into a trade.
Indicator. A set of indicators based on mathematical algorithms signals the right time to open trades, and also helps to confirm the presence of a trend or its change.
Volume analysis. The demand for an asset is indicated by the large volumes of transactions made with it. To determine the volume, indicators are also used that show the relationship between an increase in the number of transactions and an increase in the rate.
For novice traders, technical analysis of cryptocurrencies worth studying in conjunction with popular trading strategies, trying each method in practice, following the market trends that are constantly changing. In the Crypto community Crew you will find more information to predict the price of assets in the market. We teach technical analysis of cryptocurrencies to novice traders and investors. Join the community and sign up for our course to start earning on crypto faster!