Technical Analysis for Cryptocurrency Newbies
Practically everyone here has heard about mysterious technical analysis. Nevertheless, newbies turn to it only after numerous monetary losses. What is it really all about? Why do we need it? That's exactly what we'll cover in this article. Let's get started.
Technical Analysis: Definition
Something obvious to professional traders.. a nightmare to newbies. Fair enough. It is difficult to be aware of every aspect of trading. So let's start with the definition. Translating into plain english, technical analysis (TA) is a way to predict price movement. Note: ABSOLUTELY ANY price. Moreover, any graphics in the world. With this tool, you can learn how to predict and confidently control upcoming events.
The main application area of TA is, of course, markets. This technology was invented specially for them. Thanks to this analysis, millions of traders look clever trying to figure out where the price is going. Some players are skeptical about this instrument for trading. There are reasons for this. However, others consider it helpful in the work.
It can be used for both BTC and any other currency or stock markets.
Keep in mind that the use of technical analysis on crypto exchanges has some pitfalls. Low liquidity is to blame. In some cases, it can be even more useful for digital gold than for other assets. After all, this market is characterized by a fast news flow and high volatility.
Advantages of Using TA
The price levels, as well as the fluctuations that express the trend, determine the mood in the market. As experience shows, sharp swings in prices are a common thing for the crypto space. It is possible to declare with confidence that the BTC rate is highly dependent on the catchy media headlines. Traders often make decisions based on news, advice, or other people's expectations. The "technical" trader has the opportunity to make the most informed decision possible and set priorities correctly. He doesn’t need to rely on someone else's opinion.
How Does Everything Work?
We know what you're thinking: how can the lines on the chart determine the current trend? The thing is that everything you see on the chart is just the ratio of supply and demand, nothing more. When demand is stronger than supply, or vice versa, a trend begins.
To paraphrase the above, in TA we study the market, its “emotional state”, the optimistic or pessimistic mood of traders. "Behavioral” or even" emotional "can be an alternative to the word "technical".
The list of methods can go and on. However, they can be divided into the following categories:
- support and resistance;
- technical indicators;
- graphical patterns in large areas;
- candlestick patterns;
- depth of market, order volume, etc.
Despite criticism from some traders and scepticism from others, TA is a useful tool that helps determine the long-awaited trend change in the cryptocurrency market. If you learn how to use it right, you will discover new talents, become smarter and more sensitive to what is going on in the world of virtual currencies.