Crypto trading is a very technical job which requires the usage of several tools for assessing the cryptocurrency market. Technical analysis is one of the primary methods which traders adopt, so as to get better clarity about the market conditions and stay abreast of trending practices. This data is very crucial for improving the accuracy of predictions and taking wiser decisions.
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Technical analysis of cryptocurrencies takes into account the complete history of the coin, along with its pricing records and volumes of trading, irrespective of the functionality of the coin.
You cannot start with technical analysis before getting an idea of the fundamentals of Dow theory.
So here’s what the theory says in brief.
- All aspects are considered by the market when it comes to pricing. Whether it’s the existing details, prior information or upcoming trends – everything is taken into consideration while determining the current prices of the assets. This also includes the demand information in terms of the past, present and future, along with any relevant regulations that has an impact on the cryptocurrency market.
- It is important to remember, that whenever there is a movement in the prices, it is not random. In fact, in most cases, they follow specific trends, which can be both long and short term. The art of isolating these trends in order to gain profit, is what technical analysts need to master.
- When it comes to asking questions as a technical analyst, focus on the “What” more than the “Why”. What deserves the focus here is the pricing details of the bitcoin, rather than the aspects which are responsible for altering its price.
- Finally, you need to believe that history would repeat itself quite often. Thus, based on past trends, it is possible to predict the sentiments of the market in future. Therefore, as a trader you might have to respond to a specific scenario in the same way as it was handled in the past.
What are trend lines?
To put simply, trend line is basically the direction towards which a bitcoin is moving, and this piece of information is extremely valuable for cryptocurrency traders. Observing and analyzing the price movement trend of a bitcoin or cryptocurrency offers a great deal of insight and reveals valuable details.
What are levels of support and resistance?
Resistance and support levels are essentially horizontal lines in contrast to the trend lines. These levels reveal values which are important for determining the present supply and demand scenario of a bitcoin.
What is a moving average?
This is another important analytical tool adopted by technical analysts in order to isolate and recognize a trend. The moving average, as it sounds, is basically the average price of a bitcoin as calculated over a specific period of time.
These are extremely preliminary details when it comes to technically analyzing bitcoins.
Hope this helps to get started with your crypto trading.
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