There are two primary methods used to make investment decisions:
The price of an asset reflects the sum total knowledge of all market participants; their analysis, views and actions.
Technical analysis is the study of statistical trends, collected from historical price and volume data, to identify opportunities for trade. Technical analysts observe patterns of price movements, trading signal and other analytical tools to evaluate the strength and weakness of an asset.
Technical Analysis can be applied to any security with historical trading data such as cryptocurrencies, forex, commodities and stocks.
A chart of prices and volume represents all the past decisions taken by market participants (buying and selling). This information will, in turn, affect future participant decisions in two ways:
There are three possible trends:
Sometimes traders also use the terms “Bearish” and “Bullish” to refer to a trend. Bullish comes from the bull, who strikes upwards with its horns, thus pushing prices higher and bearish comes from the bear, who strikes downward with its paws, thus driving prices down.
Movements are not linear, the price will face resistance as it goes up or support as it goes down.
When the resistance level is broken it usually becomes a support level and vice versa.
In technical analysis, support is often used as an entry point and resistance as an exit point. In the case of strong trends, the price can go through support/resistance without stopping.
If you’d like to go one step further in your analysis, here’s what analysts often look at:
These charts display bars that are known as ‘candlesticks’. A candlestick's shape varies based on the relationship between the day's high, low, opening and closing prices.
Candlestick charting is based on a technique developed in Japan in the 1700s for tracking the price of rice but a suitable technique for trading any liquid financial asset. Candlestick can be studied individually (simple patterns) but more often used in groups (Complex patterns). The purpose of Candlestick charting is to determine the market trend.
An average of the closing price of the stock over a specified number of period.
Bollinger Bands display a graphical band (the envelope) with a simple moving average in the middle. The width of the envelope expresses the volatility.
Volatility refers to the rate at which the price of an asset can increase or decrease. A higher volatility means that the asset can potentially fluctuate rapidly within a larger range of value.
When the price moves away from the average, it is likely to have a mean reversion. Just like a spring that tends to return to its position of equilibrium, the more it is stretched, the greater the force.
Moving Average Convergence Divergence (or MACD) is a trend following indicator that looks at the combination of two moving averages:
These two moving averages are combined to identify what is the current trend and if there is a change in the momentum.
The MACD lines displayed below can be interpreted as follows:
See how we have applied this technique in our Community app:
One of the most effective means of influencing the public is media. Breaking news and headlines may instill panic and fear in a mass manner, as well as euphoria. The impact of news on the cryptocurrency market is perfectly illustrated by the high-profile events in the world. In September 2017, the Chinese authorities have banned ICO which led to the collapse of the bitcoin price — from $ 5000 to $ 3000. However, there is always another side of the coin, Bitcoin spiked when eBay and Dell said they considered accepting Bitcoin.
With articles like the one above we aim to help you reach a better understanding of the Daily Bitcoin Analysis, available to you in the Learn tab of our Community app.
No market lives outside the events that shape the world. That is why within the Learn tab, we provide pertinent updated news that can impact the cryptocurrency market. Our goal is to grow and educate our community.
If you haven’t yet, download the SwissBorg Community app now and play our bitcoin price prediction game. Let us teach and reward you with zero risks to your pocket! Here’s your chance to learn to predict like a pro!