2024-02-08 14:23:13
Авторка: Inna Svatenko 
Technical Analysis of Cryptocurrencies: Basic Principles, Indicators, Mistakes
Before opening transactions, traders study price charts. They look for support levels that indicate an increase in demand and resistance levels that indicate an increase in supply. When the exchange rate reaches these points, a trend change (a rebound and change in price direction) or a breakout (continued price movement in the same direction) may occur. Technical analysis of cryptocurrencies helps to find such points and make informed trading decisions.
In this article, we will review the basic principles of technical analysis, analyze its key indicators, and discuss the mistakes traders make.
Content
Basic Principles of Cryptocurrency Technical Analysis
Technical analysis is based on the study of patterns, historical price indicators, and trading volumes.
The basic principles of cryptocurrency technical analysis:
- History tends to repeat itself. Traders study price data on charts to identify patterns and trends.
- Trend is your friend. Analysts identify current trends and determine if they will persist and whether a reversal could occur.
- The current rate is the real value of the crypto. It is assumed that the current price is already the result of all the events and factors that may have influenced it.
How to conduct a technical analysis of cryptocurrencies?
Below is a step-by-step guide that will help you analyze cryptocurrency:
- Choose a platform that provides price charts and other tools for technical analysis.
- Study the price charts of the selected cryptocurrency at different time periods. Evaluate the current trend, support and resistance levels, trading volumes, and other data.
- Try to recognize buy/sell signals using indicators.
- Study candlestick patterns. Cryptocurrency technical analysis patterns will help you anticipate the course movement.
- Check trading volumes to assess the strength of the trend and find possible turning points.
The cryptocurrency market is constantly changing, so it is important to continuously update strategies and adapt them to the market situation.
Technical Analysis Indicators
Investors pay attention to several signals when performing technical analysis of cryptocurrency.
Moving averages (MA)
This is the average price of two assets. The indicator allows you to identify current trends (not new) and understand the sentiment of participants. Areas where the price touches the MA can be good points to buy/sell tokens.
Moving Average Convergence/Divergence (MACD)
This indicator can be used to recognize the strength, trend direction, and reversal of trends. It is presented in the form of two MAs, at the point of intersection of which a trade should be opened.
Relative Strength Index (RSI)
It is used to analyze recent rate changes, as well as to measure oversold or overbought assets.
Bollinger Lines
The indicator is presented in the form of two MAs, the interval between which shows the degree of volatility of the token. If the rate crosses the upper line, it may indicate a probable price decrease (a sell signal), and if the lower line is crossed, it may indicate a price increase (a buy signal).
The Role of Technical Analysis in Cryptocurrency Price Forecasting
Technical analysis helps in predicting token prices. By paying attention to trends, support/resistance levels, sentiment of participants, and market volatility, you can predict the direction of price movement.
Thorough cryptocurrency analytics helps investors make the right decisions, increase profits, and manage risks.
Mistakes in Technical Analysis of Cryptocurrencies
Emotions are a key factor that can prompt a trader to violate the strategy and lead to losses. The main mistakes are:
- closing a profitable position early;
- keeping a position at the local maximum in the hope of the trend continuation;
- premature closing of a losing position;
- keeping a losing position for a longer time expecting a change of trend;
- excessive self-confidence;
- excitement, desire to “win back” after several losing positions;
- info noise, change of strategy based on the advice of famous persons.
How to do technical analysis of cryptocurrencies to avoid these mistakes? Experts advise maintaining a calm psychological state during trading.
FAQ
The trend strategy is considered the most popular. Trading participants try to identify the current trend in the crypto market and open positions in its direction.
The rebound strategy is also quite common. Traders look for levels of rising and falling demand on charts and open trades on the price bounce from them.
There are two main concerns: false signals and delays. Technical analysis of the cryptocurrency market uses data on previous prices, which can change a lot. If the indicators are too sensitive, they can give buy or sell signals more often than necessary. And if they are set to look only for strong trends, signals may appear late.
To minimize losses, experts advise controlling emotions, using stop losses, and regularly reading news and analytics to gain new knowledge. In addition, portfolio diversification and pre-testing the strategy can help.
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