Technical analysis helps the business to foresee all the risks related to crypto like price fluctuations, volume data, price levels etc. Technical analysis looks at price movement and helps reduce risk. TA is very helpful when trading with crypto, it helps the trader to assess the value of stocks and assets in the financial markets. Mastering TA is easy but it requires utmost dedication and discipline. If you want to know more about bitcoin trading then you may click here.
Meaning of technical analysis (TA)
Technical analysis helps the trader foresee or predict the price movements of an asset by studying its past performance. It helps us in identifying trends and availing opportunities. It doesn’t require any specific degree or education to master technical analysis, anyone with a good sense and knowledge of the market can be a great analyser.
Technical Analysis Work
The main objective of technical analysis is to predict the future prices of an asset by analysing its past performance. The price of an asset is dependent on its supply and demand factors. Whenever there’s an increase in supply then the price of the asset decreases and when there’s a decrease in supply then vice versa. Various tools and techniques used by analysers to anticipate price movements are known as indicators. Following are the top Technical indicators :
Top Technical Indicators
Relative strength index (RSI)
RSI is an indicator that shows results on a scale of 1-100. It shows if the asset is oversold or overbought. If the RSI indicator is below 30 then it indicates bearish price expectations while if the RSI indicator is above 70 then it indicates bullish price expectations.
Moving average (MA)
Moving average helps in predicting the future price by showing us the average price of the asset over a certain period. For example, a moving average of 30 shows us the average price of the asset according to the last 30 days. It shows us the bearish and bullish price expectations through crossovers of past averages.
Bollinger bands were invented by John Bollinger in the 1980s and it has been extensively used in various markets such as stocks, currencies, etc. It helps the trader to find overbought and oversold levels.
Pivots and Fibonacci
We all know that the price of an asset depends upon its supply and demand factors. The pivot point is the point of equilibrium at which the level of supply and demand is equal. When a price is below the pivot point then it is considered to support while if the price is above the point then it is considered resistant.
Fibonacci is a mathematical expression which can be seen everywhere in the world, it helps the trader to analyse the extended and correct amount of price.
Deficiency in Technical analysis
Technical analysis can be inaccurate or imperfect sometimes. It may be because of failure in anticipating the rules perfectly or because of personal bias. Also, the Technical analysis predicts the future prices based on assets’ past price movements, if the past data is not accurate then also it may fail to predict perfectly.
The main objective of Technical analysis is to foresee or predict the future prices of an asset by studying its past price movements. Moreover, it is significant to know that in most cases the asset follows its past price actions. Though, every trader should keep in their mind that Technical analysis has lots of drawbacks and is never 100% accurate. Traders should be able to understand the logic behind any movement in price. If the trader masters Technical analysis it may prove very profitable to him.