How nice would it be to be able to predict price behavior? We all think so, but a majority of investors who start trading soon give up. This is not least the case because the competition in the financial markets is extremely high. Professionals and beginners all over the world try to make a living in the markets.
This is why traders and investors all over the world are racking their brains over the perfect system to make money in the market. This also includes technical analysis. This should lead to higher returns in the long term. Because of this, traders and investors use different data points to make better decisions in the market.
Technical analysis is a multifaceted field that requires a deep understanding of market dynamics, statistical tools and techniques, but also its own limitations and the limitations of the method. Therefore, in this article we analyze the most popular form of analysis for general investors and crypto traders.
What exactly is technical analysis?
Technical analysis is a method of evaluating potential investments and trades. Analytics evaluate assets (such as cryptocurrencies) through statistics derived from market activity. The price graphs are always the focus of the technical analysis.
But technical analysis also makes use of other data points. This includes trading volume and indicators (such as trends, average prices or moving averages, oscillators and more). These points are derived from price data and can provide additional insight into price behavior.
Technical analysis can therefore provide information on market opportunities. Historical price data can be used to reveal trends and patterns that can be used for possible predictions.
In this way, one can create a sophisticated trading plan. This determines which conditions must be met in order to enter into a trade (this is also called a trading signal). The process can even be automated by bots and algorithms.
Data from technical analysis can form the basis for risk management. With their help, traders can set stop loss and take profit prices. Technical analysis can be applied to any market and over any time frame. Whether it’s crypto, stocks or commodities.
The timeframe is also irrelevant, and high-frequency traders use it as much as large investors and institutions. There are a few important points that you should keep in mind as a beginner.
Technical analysis: tips for beginners
- The fact that technical analysis can be applied over many time periods is very difficult, especially for newcomers. They often mix up the different times. Choose a preferred time slot and learn to master it!
- The main part of the technical analysis is so-called price trends. A bull or bear market is also a (macro) trend. Learn what creates a trend and learn to identify the different trends.
- Risk Management: Making money in a bull market is easy. The hard part is keeping it when prices fall. Never enter a trade without realizing the risk.
- Practice makes perfect: Investing and trading can be very difficult. Beginners in particular often have a very utopian image of these specialist areas. So don’t get discouraged if it doesn’t work out and keep at it!
Education is essential to succeed in the market
The assumptions from technical analysis of investment opportunities are not always correct. Generating signals that lead to losing trades is an integral part of technical trading. You are playing with probabilities and it is even more important to protect yourself.
Therefore, risk management and education play a huge role in the world of cryptocurrencies and trading. Technical analysis is more art than science. Different retailers may interpret data differently. So, to develop your own strategy, you should pay attention to the basics of blockchain and trading.
For this reason, there are portals like Binance Academy. All the necessary information for crypto beginners is covered there so that they can prepare for the various market phases and also be informed about all the basics of blockchain technology.
For example, you will find answers to the most important questions about technical and fundamental analysis, Bitcoin, blockchains, NFTs, metaverse, gaming and much more.
Get a 10% discount on your newsletter subscription
Applies to BTC-ECHO magazine in trial subscription, annual subscription or for single issue. Register now!
For the newsletter
Sponsored posts are paid articles for which the advertiser is solely responsible. BTC-ECHO assumes no responsibility for the promised services or investment recommendations.
The latest issues of BTC-ECHO Magazine
You may also be interested in this