What is crypto technical analysis - Guide for Beginner

Prices in the crypto market are constantly changing. It is challenging to anticipate price changes and choose the best investments to optimize profits. Many tools have been developed to assist investors in market analysis. Technical analysis is the most commonly used method today. Market247.io will provide information about Crypto Technical Analysis.

What is technical analysis?

Crypto technical analysis is the study of price charts and making predictions about future price trends by observing past price data. Basically, the price chart is created by the traders in the market making buying and selling. Therefore, crypto technical analysis is synonymous with analyzing future trends based on market sentiment.

All results of technical analysis are approximate. However, it is an important technique to assist investors with careful anticipation of market movements. From there, make the right investment decisions to maximize profits.

The main components of trade coin technical analysis include:

Information in the analysis time frame
Technical Indicators
A trader's ability to analyze and make decisions

Why learn crypto technical analysis?

As mentioned above, crypto technical analysis will help investors predict future price trends, thereby making accurate and effective trading decisions.

Technical analysis can predict price trends for the following reasons:

Prices reflect market information

Prices are expressed through the law of supply-demand, reflecting the psychology of investors in the financial market. You can, through the filtering of information, analysis base images and make judgments about future prices.

Prices always follow a perceived trend

Price movements are not random at all. Investors believe that past market price movements are a reliable indicator of future price movements. An important tool in technical analysis charts as they are the most intuitive way to track and analyze past prices.

Crypto technical analysis can be learned and practiced

At the beginning stage of entering the market, you will be stunned by the amount of knowledge to learn. However, your price prediction skills through price history data will be more advanced with practice. This is where you increase your profits from the crypto market.

Advantages and disadvantages of crypto technical analysis

Technical analysis is a strategy chosen by many investors to analyze prices and make investment decisions. However, it also has certain advantages and disadvantages.

Advantages

Suitable for beginners who lack macro-financial knowledge: The current financial market has two main schools: technical analysis and fundamental analysis. At the same time, fundamental analysis requires investors to be equipped with a lot of financial and macroeconomic knowledge. For crypto technical analysis, what they need to do is familiarize themselves with price charts. It can be said that this is an easier approach than learning financial knowledge from scratch.
Save time: The price movements that we predict by analyzing this price can happen the next day or next week, even moving in minutes. This is different from the fundamental analysis that can take place over several months or years.
There are many supporting tools: In technical analysis of trade coins, there are many indicators and models that many experts around the world have built to support price analysis. Therefore, what you need to do is to use these indicators in a way that suits you to do your analysis properly.

Disadvantages

Analysis subject to error: This is a personal analysis based on the judgment of investors, so it is subjective and errors are inevitable. Especially if you put too much emotion into the numbers, the error will be more.
Relativity: At the same time, a chart and indicators are the same, but 2 analysts can make 2 different judgments. It shows the relativity and market knowledge of the investor.
Can be manipulated: In fact, the prices of coins can be manipulated if their liquidity is small. The sharks will make the market noisy, and manipulate the price direction according to what you analyze to make a profit.

Tools in technical analysis

At the present time, crypto technical analysis is divided into two main schools. However, you should combine these 2 schools to bring the highest efficiency.

Price Action School

The knowledge and tools you need to master if pursuing this school include:

DOW Theory and Elliott Waves
Theory of support - resistance, trendline trendline
Basic Japanese Candlestick Patterns, Price Action Patterns
Candlestick patterns

School of using Indicators

Momentum indicator

Helps investors determine the rate of price movement over time. This indicator is measured by comparing the current closing price with the past closing price. They are usually below the price chart and when divergences occur, it can predict a future trend change.

Volatility Indicator

This indicator shows the rate of movement regardless of the direction of the price. They rely on the past high and low prices to determine a reasonable buy zone through the price reversal zone.

Volume indicator

This indicator helps investors to indicate the strength or weakness of a trend or confirm a trend through buying and selling volume.

How to use technical analysis?

Step 1: Observe the candlestick chart overview

The first step in Crypto technical analysis, you need to have the most overview of the price chart. You need to consider whether the chart you want to apply the technical analysis method is applicable or not through the assessment of trading volume. Coins with a high volume of trading demonstrate a higher applicability of technical analysis.

Step 2: Identify trend, support-resistance lines

To get an overview of the key milestones in the main trend, you need to look at the support-resistance milestones on each time frame from major to minor, short term and long term.

Step 3: Learn and apply price patterns

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Most trends follow a pattern. Trends are observed over a period of time and built into price patterns. If you can analyze the direction of the price according to any pattern, wait for them to confirm, the chances of successful trading and profit are very high.

Step 4: Wait for signals from the indicator

The conditions are satisfied for order matching. Once the indicators are qualified to create a trade, you need to verify it to prepare for step 5.

Step 5: Plan and execute

This is a very important step. After having a trading signal, you need to have a clear plan and stick to that plan.

Conclusion

The information summarized by Market247.io about crypto technical analysis is described above. One of the most widely used and successful techniques for price analysis in use today is this. Therefore, equip yourself with the complete knowledge before entering the market. Don't forget to follow our channels to update the latest news from the market.

Get more information about Crypto technical analysis - FAQs

Is it difficult to learn technical analysis?

Learning technical analysis won't take long if you just want to learn the basics. However, when it comes to technical analysis for profitable trading, there is nothing like learning profitable technical analysis over time.

Do successful traders use technical analysis?

Studies show that the vast majority of professional traders use technical analysis for their trading. Statistically speaking, 80% of all professional traders use technical analysis, while the remaining 20% opt for other techniques such as fundamental analysis.

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