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Cryptocurrency Technical Analysis
The cryptocurrency market can seem a little confusing for those who have traded before. Like most markets, the crypto market showcases trend lines and daily highs and lows, but where the traditional trader starts to get lost is an encrypted wallet. However, consider this, the very technical analysis that is found on the day trading market is able to be used in the crypto world as a great tool for investors. In this article we are going to take a dive into technical analysis, and how it can be best utilized in the ever-fluctuating crypto market.

What is crypto technical analysis

Before we take a deep dive into technical analysis, we should probably start with defining the term. Technical analysis in the crypto world is a methodology that helps investors make better-educated predictions on coins. Put simply, crypto technical analysis considers the history of a coin. Further to this, it utilizes price charts and trading volumes as the principal data points to predict trends. With the definition locked up, let us move to the fundamentals.

The fundamentals

When it comes to technical analysis, there are four fundamental principals that you should understand the methodology.

1.       The market considered everything in its pricing. For crypto, this includes current, past and future demand, and government regulations that will impact the market. Technicians work to interpret what the price of a coin suggests and will make calculated predictions about its future.

 

2.       Price movements are not random, but rather are predictable trends within the crypto market. Technical analysis attempts to isolate and profit from trends based on valid data points.

 

3.       The what is more important than the why. Generally, there are many aspects that influence the price of a coin. Technical analysis allows those with access to this data to review the supply and demand within the market.

 

4.       History tends to repeat itself. The market does not change drastically, and traders are nothing but a predictable bunch. Thus, with technical analysis, you will be able to predict how traders will react to certain stimuli, and capitalize on the market trends.

Cryptocurrency technical analysis vs stock or forex

When you compare Forex technical analysis and crypto technical analysis, you will see hardly any differences. Traditional technical analysis ensures that day traders can predict trends, and capitalize from these changes within the market.  As well, Forex technicians work on the same fundamental principals as crypto technicians to execute their expert predictions.

The biggest difference between the two is that crypto operates in a smaller space. While Forex technicians deal with millions of possibilities, crypto technicians are currently working with a handful of coins. However, the future may ensure that indicators and advanced methods become the norm within the crypto market.

Which trading platforms are the best for technical analysis

When looking for technical analysis on the various trading platforms, four platforms stand out for crypto.

·       Cryptowatch is a true expert when it comes to charting. The platform provides comprehensive charting for all supported currencies. As well as, ensures users can utilize drawing tools to plot charts and assist in predicting future movements.

 

·       Cryptrader is one of the underutilized platforms, but its browser-based trading tools are something to take note of. The platform allows trading across multiple platforms and exchanges and is a favorite among many technical analyst experts.

 

·       Coinigy is a household name in the technical analysis world and helps novice traders with strategy in the market. The more integrated charting options are behind a paywall which is a shame. But, for individuals who are looking for regular charting tools, the platform is still worth a look at.

 

·       TradingView is the largest name in the crypto market for technical analysis. The platform allows free users to access three indicators per chart, and a single indicator template that can be used with several top coins. The upgraded account does open the platform, but it is a pricey investment when compared to the other options on the market.

Advanced technical analysis methods


Once you start mastering the novice sides of technical analysis, you might want to consider a few of these advanced methods to better your predictions.

First, the Japanese Candlestick allows traders to see multiple data points from multiple time frames in a single price bar. This method allows traders to start to see trends within a single coin, whether it being a reversal or continuation. Plus, it ensures that traders are better equipped to predict the market. A reversal would predict a change in the direction of the price, while a continuation would predict an extension in the current price action.

Secondly, the Elliot Wave Analysis is a methodology that utilises the analysis of extremes in investor psychology to predict trends, and analyze market cycles. The key to this methodology is to look at the market as influenced by waves. As well,  each individual price action can be predicted by groups of five waves. It does take years to master this methodology, but some crypto experts believe that the Elliot Wave will be able to work within the crypto market.

Finally, Moving Average Convergence/Divergence (MACD) is an often-used indicator for expert crypto technical analysts. MACD compares short-term momentum and long-term momentum to signal the direction of momentum. Thus, MACD works to predict momentum of a coin rather than the current price. When the MACD is positive, it signals a cryptocurrencies movement is upward, while a negative MACD would indicate the opposite.

Conclusion

The use of technical analysis in the crypto industry is a new phenomenon, but from all indications, the trend is going to continue. We have looked at the definition of technical analysis, the fundamentals of the method, the fact that Forex technical analysis is essentially the same as crypto technical analysis, the best trading platforms for technical analysists and finally advanced methods for technical analysis. The only thing left is for you to get cracking, and see what technical analysis can do for your crypto trading.

If you are interested in reading more about Crypto Technical Analysis, feel free to check out our article about Crypto Technical Analysis Tools.

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