There is more to cryptocurrency than what you think; although investing in cryptocurrency can be normal for some, there is still a lot more to analyse from time to time. Managing your cryptocurrency investment, especially on larger amounts, would require you to make analyses on the charts and on the latest updates as well.
Internal and external factors should be considered in cryptocurrency movements. Besides the basic supply and demand, there is the pattern of buying techniques of most investors, projects launched by individual coins or cryptocurrency, alt season. Some factors are the socio-economic status of the world and by individual countries, publicity from the popular names in the cryptocurrency industry and a lot more. The Bitcoin Evolution website can connect you with experts who can help you with your investment.
With all of the factors given, you would most likely see the result in the value of each cryptocurrency and especially the charts. As of now, there are many real-time chart updates for each cryptocurrency.
It is so wild that there would be a movement for each second. Hence it shows the cryptocurrency’s volatility. Based on the charts, you will see the trends and movements of the cryptocurrency’s value, and most investors rely on this to build their trading technique.
Reading Charts would play an Important role for Traders
Although there is complexity, numbers are still numbers. Digits or numbers represent what they are. On charts, usually, there are just upward or downward trends depending on what the cryptocurrency is experiencing. As mentioned, it is where investors or traders gather opportunities and predict future possibilities or value movements of an asset. Basic observation of these charts usually would not be enough in one sitting.
That is why there is a technical analysis that would lead you to a trend gathered over time. Doing this would take you to a deeper understanding based on how supply and demand can affect future movements or price changes. That is why there are cryptocurrency platforms like Bitcoin Evolution that could guide you to understand and manage your cryptocurrency investment.
Signing up on those cryptocurrency platforms can make your cryptocurrency investment more efficient in trading.
How does Technical Analysis help?
There is a different kind of approach to analysing the cryptocurrency market and its charts, but on a deeper level, technical means to analyse the past trading activities and price changes. This is essential in trading and investments to predict future prices.
This is also being used in stock markets, commodities, and fiat currencies. This kind of approach was first introduced by Charles Dow, who is the founder and editor of the Wall Street Journal, also a co-founder of Dow Jones and Company. Dow was one of the people who created the first stock index. A lot of Dow’s ideas were published in most of the editorials, which were then compiled and is now known as the Dow’s Theory.
Based on Dow’s theory, there are some principles that could help us understand the market.
The Market Reflects its own and the Individuals
One of the core principles of technical analysis is that the market itself is a reflection of all the data in the system, including the value of the assets or cryptocurrencies and the price movements as well, just like when a company is projected to report positive earnings, its market value also prices upwards.
If you are familiar with trading already, you would most likely notice that this resembles the efficient market hypothesis, which also represents that the current state of the market mirrors the available information in its entirety, which can also be applied in the fair trade of value in stocks.
Three kinds of Trends in the Market-based on Dow’s Theory
Based on Dow’s theory, there are three trends in the market, which can also be applied to the cryptocurrency industry. These trends are called primary, secondary and tertiary trends. Of course, the primary trends are the first one all the markets experience.
This is expected to last longer than the other two trends which can be months or even years long. The primary trend can be a bull market, where the prices of the assets are being pulled on an upward motion or a bear market in which the assets meaning the assets, are like being stomped on a downward trend.
Right after the primary trend, there comes the secondary trend, which could be against the primary trend. The secondary trend can basically be pullbacks in the bull market, in which the asset’s value goes down for a certain time.
The other scenario for the secondary trend can go against the bear market as well, in which the assets may move up for a certain time.
For the tertiary trends, this one could last just a week or a little over it. This trend is also seen by some just as a noise in the market which won’t affect the long term movement of the asset’s value. To some, this could be ignored, but it is worth analysing to have an accuracy to the forecast.
If these trends were represented in the linear charts, they would resemble three-peaked mountains. On the left side, it would have the biggest and highest peaked mountain, right after it a smaller peaked mountain followed by the smallest peaked mountain, which sometimes can be a flat line as well.
This is just one example of chart analysis based on a market trend, and it would be essential for a trader to be knowledgeable about this. There would still be other representations and analyses on how the cryptocurrency market is moving, and it is better to be updated every time.
Although these charts are just guides to the cryptocurrency market patterns, as the industry is still volatile, the assets may experience price swings from time to time.
Nevertheless, profits in cryptocurrency don’t just happen in an instant like what most people think, just like stock exchange and other types of investment. This would take you some strategy and analyses to maximise profitability.