Technical analysis techniques for cryptocurrency
The world of cryptocurrencies has grown exponentially in recent years and many investors and dealers are trying to use the potential returns. As a result, technical analysis techniques have become essential instruments in order to understand and predict the behavior of these digital assets.
In this article we will examine some of the most popular technical analysis techniques used in cryptocurrency markets. We will discuss your strengths, weaknesses and best practices and give examples of how they can be used in real scenarios.
What is technical analysis?
Technical analysis is a method for analyzing price diagrams and patterns to predict future price movements. It is based on the idea that past performance does not necessarily indicate future results, but to the current market conditions, trends and patterns. Technical analysts use various tools and indicators to identify potential trends, support and level of resistance as well as other market signals.
1. Diagram pattern
Diagram patterns are graphic representations of price movements over time. They offer valuable insights into the trend, volatility and the direction of a cryptocurrency. Some common diagram patterns include:
* Head and shoulders : A common pattern in which the price forms a head, followed by a shoulder, and then falls down again.
* Double top/below : Two consecutive tops or soil that finally collapses.
* Reverse head and shoulders : The opposite of the head and shoulder pattern.
2nd average movement
Moving average values (MA) are mathematical calculations that smooth the price fluctuations over time. They offer a single value for the price of a cryptocurrency, with all historical data into account up to the current date. Include mas:
* Easy sliding average (SMA) : The average price of a cryptocurrency over a certain period of time.
* Exponential sliding average (EMA) : A weighted sliding average that makes the latest prices more important.
3. Relative strength index (RSI)
The RSI is a popular impulse indicator that measures the size of the latest price changes. It oscillates between 0 and 100, whereby higher values show overhanged conditions.
* chained : A value over 70 that shows excessive purchase pressure.
* oversized : A value below 30 that shows excessive sales pressure.
4. Bollinger ligaments
Bollinger gangs are a volatility indicator that compares the final price of a cryptocurrency with its average price over a certain period of time.
* upper band : The upper border above the current price.
* Lower band
: The lower border below the current price.
* bandwidth : The area between the two ribbons, which indicates volatility and possible outbursts.
5. Support and resistance level
Support and resistance levels are of crucial importance in the technical analysis. They represent areas in which the price of a cryptocurrency is likely to jump or fall back. Frequent support levels include:
* Short -term support : A level under which the price probably does not increase.
* Long -term support
: A level above the price over which the price will probably not decrease.
The level of resistance is the opposite of support levels that represent areas in which prices can rise higher or lower. Examples of resistance levels for some popular cryptocurrencies are:
- Bitcoin (BTC): 6,000 to $ 7,000
- Ethereum (ETH): $ 400 $ 500
6. Trend indicator
Trend indicators measure the overall direction and strength of the price movement of a cryptocurrency.
* Stochastic oscillator : an impulse indicator that calculates the percentage difference between the closing price and the sliding 14-day average.
* MACD (sliding average convergence -divergence) : An impulse indicator that compares the speed of two movable average values.
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