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How to trade Crypto using technical analysis?

The Bitcoin and the other crypto looks are “the hot topic of the day.” This, apart from the high appreciation of virtual currencies, attracted the attention of the investment community over the past year is also due to the increased interest in block technology by financial institutions.

After rising 17 times in 2017 and reaching a historic peak, at levels of nearly $ 20,000, the battlefield collapsed at the beginning of 2018, reaching in March the lowest value of $ 6,500. After a long consolidation and narrow range movement, however, the digital currency rose in the two days to April 13 with over $ 1,500, with 1,000 of them occurring in about an hour on April 12.

Now the question that everyone is asking will the price of the crypto-wave continue to rise or not? And while we do not have a “crystal ball” to answer this question, what we can do is how to approach the crypto ball in order to maximize the benefit of increasing its volatility …

Why is it better to trade a battlefield instead of investing in it?
It’s no coincidence that many investors are experts compared battlefield, with gold. The reason — the lack of internal value and movement wholly predetermined by the demand and supply of the asset.

When investing in a certain asset, you are basically doing this on a foundation basis, based on asset value prospects, based on sound logic and financial ratios. Put another way — based on a fundamental analysis.

How, however, can you make a fundamental analysis of an asset that has no intrinsic value? The answer is — in no way …

That’s why, Warren Buffett, a supporter of value analysis, does not like gold, dislikes, and cripples!

For the account of this, however, technical analysts adore the crypto-lute. Because the technical analysis is one of the few types of analyzes that you can apply to the battlefield and other digital currencies.

What is the similarity between the battlefield and the gold?
As we have already said, the battlefield is very similar to gold, in that both assets have no intrinsic value. They can become a way of storing the value. In the future, their price may be largely influenced by demand for shares of index-based funds.

The situation, however, is much more complicated in crypto-lutes. First, they have no correlation with any other asset. For comparison, gold is correlated with the dollar’s movement.

Cryptools have no correlation with geopolitical risks. The search for crypto looks is not yet predetermined by the direction of central banks, as there are not many funds based on the price movement.

We all saw how the cryptoLuts remained stable and did not substantially change their value during the geopolitical whirlwind in mid-April, linked to fears of US-China trade war and tensions between the US and Russia in Syria.

CryptoLabs may be subject to regulation, however decentralized they may be. The latest proof of this came in the direction of China.

CryptoLooks can become the subject of cybercriminals. Here, you understand not only theft of electronic portfolios, but also theft from fraudulent schemes, unregulated exchanges, deceptive traders, and so on. Not to mention that of all the new crypto-loops that go out and promise investors to make them rich, they will not really exist after a while.

In this line of thought, gold can be defined as a far more secure investor tool. At least because of its long history of trading.

How can you trade with cryptocurrency using the techniques of technical analysis?

First, what is a technical analysis? This is the application of analytical principles to determine the future direction of trading of an asset, mainly based on its historical performance. Technical analysis techniques are many and varied, allowing traders to choose the most suitable for them, based on their trade styles, commercial goals, and risk-aversion.

In fact, technical analysis is one of the few types of analysis that you can apply to the battlefield. And some of the reasons for this are that the fundamental analysis is virtually inapplicable on the battlefield.

First (which is also one of the main issues, and keeps the big institutional investors away, to target funds to the battlefield) is the fact that the currency has no “intrinsic value”.

Or, how much the cryptoLight will cost is entirely determined by what market participants think is fair. In this way, it looks very much like gold.

And the lack of internal value makes it possible to use the primacy of fundamental analysis to determine the “fair price” of the battle, impossible, and we can only recall that Buffett does not like gold, precisely because of the lack of internal value.

Secondly, the battlefield is a decentralized payment system and, in this direction, a currency. Or there is a lack of regulation and decisions by such bodies that affect supply and demand, and on the basis of which a fundamental analysis, similar to traditional currencies, is made.

By comparison, the dollar, the euro, and other currencies are influenced by the monetary policy and decisions of the institutions that regulate them — in the face of the Fed and the ECB. And the prediction of these solutions and policies is a fundamental part of the fundamental analysis.

Once we have clarified this, we can look at the technical analysis and some of the possible ways to apply it …

Determination of Trend at Bitcoin
“The trend is your friend” is the basic rule in technical analysis. “ That’s why it’s important to know what’s the trend in crypto-lite before you start trading with a battlefield.

Another rule of technical analysis is: always switch from a longer to a shorter trend in a graphical analysis of an asset.

There is a very simple way to determine the trend and this is using creeping averages. Namely, one longer and one shorter one. When the short-term moving average is above the long-term, the trend is assumed to be ascending.

Analysts use different, temporal and creeping mean values. The most common use, however, is the 200-day and 50-day, simple (which assigns the same weight to all time periods) and exponential (giving more weight to the last time periods) a moving average.

Everyone for himself can determine what kind of medium and temporal mean to use. We will give an example, however, with the 200-day and 50-day simple creep values for the battlefield, on a daily chart.

As you can see, the trend is rising, with the short-term below the long-term line missing in the last year. That is, investors still have little to worry about.

However, the two medium-sized lines, apart from trending, can be used by investors as well as levels for putting stops to curb profits. The first alarming signal for an asset when it is in the upward trend is given when the price falls below the short-moving moving average. Or long-standing investors can position their lulls to limit the loss, in this case, below the 50-day moving average, or about $ 2,550 at the moment.

Lines of support and resistance
Lines of support and resistance are another extremely important and technically used method. They are used to determine entry or exit levels.

See also: Breakthrough and reversal at key levels of resistance and support

Simply put, the lines of resistance and support are the previous bottoms and peaks, of which the price has the property of deprivation. Support is a level at which the price of one currency pair usually limits its decline. Conversely, resistance is a level that has the ability to stop, the rise of the currency pair.

These levels act because of the propensity of investors to judge whether a financial instrument is “expensive” or “cheap” compared to previous tops and bottoms. To a great extent, these technical levels come into force, precisely because they all expect it to come into force. This also triggered the so-called “self-realizing prophecy”.

What happens when an asset approaches a previous bottom? Buyers become more active and start to buy hard. This is an environment where vendors are not very willing to sell, pending evidence that the depreciation will continue, that is, expecting a breakthrough in support.

Conversely … When the asset reaches a peak, vendors become more active and buyers take a wait-or-see position. This leads to a deviation from the stated resistance level.

Cropping averages, especially in heavier graphs, are a good tool for determining the trend, but not particularly good in pointing to the best moment to enter a position. And here the lines of resistance and support come to help.

As we can see, the $ 2,550 level of Battlefield, where its 50-day simple moving average is now, is well below the levels of crypto-wave trading that are over $ 3,200 now. More precisely about 21%. Such a stop, however, may not be particularly well suited to bitter trading, especially margin-taking.

Therefore, we look back at the chart to determine a level closest to and appropriate for limiting the loss, which is not far above 20% of the current price.

A traditional rule in the lines of resistance and support is that when they are strong and overcome, they become the opposite of what they were — that is, the resistance is backed up, and the supportive resistances.

As we have seen, the psychological limit, for a long time, was an insurmountable level for the battlefield. With the breakthrough at this level, however, the weekend, in addition to a strong further increase, is now expected to play the key-level support function. The reason — whenever the cryptoLight comes closer to it, new buyers are expected to appear to support the price.

Japanese candles
We can not talk about technical analysis and not talk a bit about the graphics. They are many and varied types — linear, bar, arithmetic, geometric, with Japanese candles, etc.

Part of the attractiveness of Japanese candles is in the visualization of the chart, which gives an idea of market behavior and key turning points. It is the latter that is another feature of the indicator that makes it a preferred tool by technical analysts.

You can use Japanese candles on any market and in any timeframe as long as you have an opening price, a closing price, the lowest and the highest value. This is how the basic configuration of a Japanese candle looks.

Now we look at the graph to see if there is a signal given by Japanese candle models.

Although there is no formation to forecast the future direction of the price, we notice something interesting on a daily chart. Namely, the lowest values of the last two candles are almost the same at a level of $ 3,169.
Or another level to put stops on short-term traders.

Fibonacci figure
This indicator is based on the idea that after a strong movement in a certain direction there is an increased ability to adjust to certain proportions.

These proportions are determined by the Fibonacci line. Strategies for trading based on Fibonacci levels

This is a sequence of numbers known since antiquity but popularized by the Italian mathematician Fibonacci. It is on it that she is also called. Fibonacci’s modern lineup starts with 0 and 1.

Each consecutive number is the sum of the previous two values.

Here’s what the number of numbers looks like — 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 …

The Fibonacci ratios, which are considered to be the most important levels of correction, come from these numbers. The most important of all ratios is the 0.618 ratio. This ratio is obtained by dividing a number from the line of Fibonacci with the immediately preceding one.

The value of the ratio starts to tilt to 0.618 as you progress in the row of numbers. For example, 89/144 = 0.6181 and 144/233 = 0.6180.

Another key ratio is the 0.382 ratio.

It is obtained by dividing a number from the Fibonacci line, with a number from the same row but one point ahead.

There is a tendency to reach 0.382 as you progress along the line. For example, 55/144 = 0.3819, and 89/233 = 0.3820.

The last important ratio is 0.236. It is obtained by dividing a number from the row with a number, two places from it. For example, 55/233 = 0.23605.

There are, of course, other Fibonacci numbers that are the result of different combinations, but the above-mentioned can be identified as key.

What does all this mean?

In theory, it is assumed that, following a strong trend movement, the market tends to adjust to the Fibonacci key ratios. This is a very used indicator for traders because he is trying to predict where a certain corrective movement would be stretched.

As we can see from the graph, the first level of leveling — at 23.6% of the marked increase is at a level of about 3000 dollars. Or there is another confirmation that the psychological limit can be very important support. And the more confirmations you have on one level, the stronger it is in terms of price.

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How to trade Crypto using technical analysis?

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