Over the years you might have wondered how fluctuations happen, and the prices of major cryptocurrencies keep on changing.
The graphs look interesting, but most of us fail to understand its significance. However, they are one of the best means used for predicting the prices of a particular stock or security.
Analysts are often busy trying to predict the direction in which a particular currency is heading. They use different approaches, and the most common ones are Fundamental, Sentimental and Technical Analysis.
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Analyzing Crypto Price Changes with Technical Analysis
Technical Analysis involves analyzing statistical trends based on historical activity. It examines the price movements along with other vital indicators like trading volume.
Fundamental analysis, on the other hand, involves looking at the levels where the prices are heading.
The factors are the economy, management of a company, etc. Sentimental analysis, on the other hand, is where traders observe the pulse of important players in the market. It involves influencers, consumers, and journalists.
It considers the trends like panic selling and purchasing spree in addition to data which is often considered inconclusive.
Do Charts form a basis for technical analysis?
Candlesticks are the primary components of a chart. When performing technical analysis, an observer will like to see how the prices evolved over the past few days, weeks and months. Candlesticks allow us to acquire a detailed view in regards to the fluctuations that a crypto asset has undergone. The trend becomes positive when we start seeing more of the green candlesticks. But trend is negative if more red is visible on the screen.
What to do after understanding what the chart is showing?
Certain shapes are often considered to be triggers or opportunities for a trader. Hammer candlestick, for instant, is reflected by a long line generally at the bottom indicating a fall in prices steeper than normal before it recovers to close a bit higher. It is a situation where a particular currency has been selling extensively. Other important scenarios that are worth noting are Shooting star candlesticks and Hanging man candlesticks.
What is the best technique that you should adopt for technical analysis?
Trend lines are a popular method. They aim at disregarding anomalies and extreme outliners concerning the price of the cryptocurrency. It helps in detecting an upward trend where an asset is about to hit new highs shortly. Moving average is another strategy that helps in predicting the price changes.
Is technical analysis single-handedly a great indicator?
Although it is a common approach to predict pricing, one has to consider other factors too. It doesn’t consider fundamental factors that might be affecting the prices. Hence, to get a comprehensive view of a particular cryptocurrency, it’s important to consider both the technical and fundamental factors.
