Technical analysis techniques for cryptocurrency
The world of cryptocurrencies has developed exponentially in recent years, and many investors and traders are trying to use potential returns. As a result, technical analysis techniques have become necessary tools for understanding and predicting the behavior of these digital assets.
In this article, we will examine some of the most popular technical technician techniques used in cryptocurrency markets. We will discuss their strengths, weaknesses and the best practices, as well as give examples of their use in real scenarios.
What is technical analysis?
Technical analysis is a method of analyzing price charts and patterns to predict future price movements. It is based on the idea that earlier results do not necessarily indicate future results, but rather on current market conditions, trends and patterns. Technical analysts use various tools and indicators to identify potential trends, support and resistance levels and other market signals.
1. Chart patterns
Chart patterns are graphic performances of price movements over time. They provide valuable insight into the trend, variability and direction of cryptocurrency. Some common chart patterns include:
* Head and arms : A common pattern in which the price creates the head and then the arm, and then drops back.
* Double top/lower : two more vertices or DNA, which will eventually collapse.
* The opposite head and shoulders : The opposite of the head and shoulder pattern.
2. Medium movable
Medium walking (MA) are mathematical calculations that smooth price fluctuations during time. They provide one value of cryptocurrency price, taking into account all historical data to the current moment. Common Maj include:
* Simple movable average (SMA) : Average cryptocurrency price in a certain period.
* Movable average lecture (EMA) : Weighted average mobility, which brings more importance to the latest prices.
3. Relative force indicator (RSI)
RSI is a popular momentum indicator that measures the size of recent price changes. It oscillates from 0 to 100, with higher values indicating the excreted conditions.
* Curious : Value above 70, indicating excessive purchasing pressure.
* Oversold : Value below 30, indicating excessive sales pressure.
4. Bollinger bands
Bollinger bands are a variability indicator that compares the cryptocurrency closing price with an average price in a certain period.
* Upper band : upper limit above the current price.
* lower band : lower limit below the current price.
* Band width : range between two bands, indicating variability and potential blemishes.
5. Horizers of support and resistance
Support and resistance levels are crucial in technical analysis. They represent areas where the cryptocurrency price will probably affect or drop. Common support levels include:
* Short -term support : a level below which the price is unlikely to rise.
* Long -term support : a level above which the price is unlikely to drop.
Resistance levels are opposite to the level of support, representing areas where prices may break higher or lower. Examples of resistance levels for some popular cryptocurrencies include:
- Bitcoin (BTC): 6000–7,000 USD
- Ethereum (ETH): USD 400-500
6. Trend indicators
Trend indicators measure the general direction and strength of the cryptocurrency price movement.
* STOCHASKA oscillator : The shoot indicator that calculates the percentage difference between the closing price and the 14-day movable average.
* MacD (divergence of movable average convergence) : The shoot indicator that compares the speed of two average average.
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