ᐅ Crypto technical analysis ⚡ methods and laws

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Technical Analysis (TA) - What Is It in Cryptocurrencies?

Technical Analysis (TA) - What Is It in Cryptocurrencies?

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Technical analysis has a history spanning more than a century. Market players have always tried to find patterns that allow them to profit. Prominent mathematicians of their time wrote entire books on technical analysis. Any methods of technical analysis are suitable for both classic exchange-traded assets and younger cryptocurrencies, which have been present on exchanges for about a decade.

The Concept of Technical Analysis

Technical analysis is a price forecast based on its past behavior by examining charts and creating various mathematical models. In simple terms, the analysis involves identifying patterns, various indicators, maximum and minimum levels. The analysis allows determining important price levels based on data from the past.

Basic Laws of Technical Analysis

Over a long time, traders have developed certain laws:

all factors are already accounted for in the asset price - the current price value reflects the mood of market players and allows the trader to navigate assets;
the asset price is subject to a certain trend - indeed, the price trend can be upward or downward, and the price can also move sideways;
price history is cyclical - people always behave the same way, so periodically certain sections of the chart exactly repeat sections from the past.

It can be said that in addition to mathematics, a trader should be well-versed in human psychology to better understand the various motives driving other market participants.

What Methods Does Technical Analysis Use

For analysis, traders use the following methods:

creating a line or candlestick chart of price movement - a visualization method for quickly obtaining information about the asset price;
indicator analysis - the trader uses moving averages, Bollinger Bands, various oscillators, and other tools to predict the future price of an asset;
pattern analysis - the price chart forms various patterns, knowledge of which guarantees achieving set goals;
candlestick analysis - often the body of a candle can indicate significant changes in the asset's value in the future;
Fibonacci levels - a rather complex algorithm based on the Fibonacci sequence.

Overall, technical analysis serves as insurance against trading losses, and studying it allows for the most productive work in the speculative cryptocurrency market.