If you want to learn how to analyze cryptocurrency, there are several tools you need to get familiar with. These tools will help you understand the position of the market and make great predictions. One thing you have to understand is that the crypto market is a highly volatile one and if you must get things right, you need to understand the workings of the market and this include how to perform technical analysis cryptocurrency.
If you are new in the cryptocurrency market or searching for crypto-related services, you might get overwhelmed by the graphs, charts, and information presented about different cryptocurrencies, but as you get to understand crypto technical analysis and how the market works, the entire cryptosystem will become simpler and make sense. This guide is meant to expose you to gain a better understanding of the various online price charts, price predictions, and market forecast of different cryptocurrencies. Before we delve further into the world of technical analysis cryptocurrency, let’s gain a better understanding of the term “technical analysis.”
What is a technical analysis?
Many a crypto professional have described technical analysis as the process of using real-world data derived from the crypto market or other top sources and plotting it to forecast its future outcome. Such an analysis will enable you to predict when the market will go up or down. Therefore, you will have a chance to buy when the market price is low and sell as soon as the price gears upward.
Several writers have written about the best way to analyze the market for great outcomes, but the fact is that the term “analyzing” is a skill that must be learned through testing, trails and errors, until you finally get it right. The ability to understand the visible elements on a chart and understand how they can affect the price of the cryptocurrency make you a good crypto trader even if there is still room for growth.
What is a candlestick, and how does it work?
If you want to analyze the crypto market as a writer, one of the first technical analysis, you may have to contend with on a price chart is the candlestick. This describes rectangular shaped objects (either green or red) on a price chart.
The rectangle indicates the gap between a particular coin’s opening and closing balance. If you are searching for the price of a coin for 24 hours time gap, then the candlestick will indicate the difference between the opening price at the bottom and closing price at the top for that day. A reddish candlestick indicates a loss while a green colored candlestick indicates profit or gain for that period.
The volume of sales
This is yet another metric you will see as you examine the price graph. If you are learning cryptocurrency trading to enable you to perfect your writing skills in that field, then a good understanding of how the volume works is necessary. This is also vital when you are searching for crypto trading service on the internet. You will find the literal volume of sales of a particular coin within a specific period (day, week, month) at the bottom of a price chart, often displayed as a column. If you want to deliver a speech on a specific crypto coin and discuss its prospect, the sales volume is a good aspect to highlight. However, you may consider looking for a writer at a speech writing service online to help you with the resources you need. Because sometimes you need to ask for help, rather than do everything by yourself.
The sales volume and candlestick trend are not the only information you need to predict the movement of a price chart of a specific coin. You need to consider the price movement over a long period, such as days or weeks. It is vital to enable you to know the right time to buy or sell. This is the moving average. There are two types of moving averages when examining a price chart: the simple moving average (SMA) and the exponential moving average (EMA.
- The simple moving average (SMA)
The SMA indicates the average closing price of a coin over a specific period. For seven days, the average is the SMA of the previous six days, plus that day divided by seven. As the new closing balance is added for each day, the older closing balance for previous days is dropped. Hence, the reason for the frequent up and down movement of the line across a graph. The SMA is considered by many as the best indicator of the moving average.
- The exponential moving average (EMA)
The EMA is slightly complicated than the SMA that follows a custom pattern. Using a typical seven days example, the EMA does not treat the closing balance equally like the SMA. It weighs previous days based on how close they were in terms of price to the current day. Hence, it assigns more weight to the previous days than other days. Due to the descending importance, it attaches to these days, it is, therefore, more reactionary, which is best for the volatile nature of the crypto market.
So how can the moving average help you understand crypto technical analysis? It shows the level of resistance to selling or buying at a specific price point. If it goes past the moving average, it indicates that the market is going bullish and you should look for opportunities to sell. But when the closing price doesn’t get passed the moving average, it indicates there is a resistance, hence, the reason why more people are selling.
- Analyzing the trend
With the above information, you are now equipped to analyze the price graph of a particular coin. After successfully analyzing the trend, you should be able to know the right time to buy (on the top) and when to sell to realize some profit (on the bottom).
The information presented in this article will give you a good head start if you want to learn how to analyze cryptocurrency for a beginner.
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