Bitcoin & Crypto Technical Analysis Explained
Technical analysis is basically a form of trading discipline used to appraise investments and classify trading opportunities by analyzing various statistical trends acquired from various trading activities such as price volume and movement. While fundamental analysts try to assess a security’s intrinsic value, technical analysts evaluate a security’s weaknesses and strengths by focusing on price movement patterns, trading signals, and other analytical charting tools. Understanding these areas while charting BTC can dramatically increase your understanding of the space!
Technical analysis is often used in securities with historical trading data such as Bitcoin, crypto, futures, currencies, fixed-income, commodities, stocks, and other types of securities. In this article, we will mostly be analyzing stocks in our examples. However, it is worth noting that you can use most of these concepts on any security. Before moving forward, it is also worth noting that the use of this technique is quite prevalent in forex and commodities markets where traders tend to place more focus on shorter-term price movements. The best way to look at Bitcoin is probably by using TradingView, it is our favorite area to chart and build a community so far and there are tons of great charts for Bitcoin price or btc/ltc ect- You can choose from a large number of cryptocurrenceis and stay up to date with things like Bitcoin news and events.
Understanding the Difference Between Technical and Fundamental Analysis
-Technical analysis is more of a trading discipline used to identify trading opportunities in patterns seen on charts and price trends and to evaluate investments.
-Professionals who employ technical analysis believe that a security’s past price changes and trading activity are valuable and reliable indicators of how its price will move in the future.
-The main difference between technical and fundamental analysis lies in the fact that fundamental analysis primarily focuses on an organization’s financials rather than historical stock trends or price patterns.
Technical Analysis Basics
This type of analysis was introduced to us through the Dow Theory by Charles Dow in the late 1800s. A couple of noteworthy researchers, including Edson Gould, John Magee, Robert Rhea, and William P. Hamilton, further contributed to the theory’s concepts, helping form its basis. As time has gone by, it has evolved to include hundreds of different signals and patterns that have been developed through years of study and research.
To technical analysts, past changes in a security’s prices and trading activity are valuable indicators of how its prices might move in the future. Most analysts use technical analysis separate from other forms of research or in combination with various intrinsic value concepts. However, the conviction of most analysts is often solely based on the statistical charts of a stock. The MTA (the Market Technicians Association) is one of the more popular groups that support technical analyst’s investments with the CMT (the Chartered Market Technician) designation is one of the more popular certifications for advanced technical analysts.
Technical Analysis’ Underlying Assumptions
There are two main methods used to make investment decisions and analyze securities: technical and fundamental analysis. Fundamental analysis typically involves studying an organization’s its tech and general mission statements to determine the organization’s fair value. Technical analysis, on the other hand, follows the principle that an altcoins price as it reflects this publicly available trade data and, therefore, places focus on analyzing the Bitcoin price movements. This approach involves trying to understand the sentiment behind price movements by studying market trends and patterns instead of analyzing the fundamental attributes of crypto.
In the 1800s, Charles Dow released several editorials that discussed the theory of technical analysis. His works included two assumptions that are still being used as a framework for technical analysis trading to this day.
Markets tend to be more efficient with values that represent factors which influence the price of a security. However, it is worth noting that the movement of market prices isn’t purely random – price movements follow identifiable trends and patterns that repeat themselves as time passes.
The EMH or the efficient market hypothesis essentially means that a security’s market price at any given time will accurately reflect all the available data, and therefore, is representative of the security’s fair value. This supposition is based on the notion that market prices are indicative of the knowledge all market participants possess. While this theory is believed to be valid to some extent, it can sometimes be affected by announcements or news about securities with varied long-term or short-term influence on their prices. Technical analysis, therefore, only works best if the markets are efficiently weak.
The second assumption about technical analysis is that price changes aren’t random, which causes many technical analysts to believe that market trends, both long-term and short-term, can be easily identified, making it possible for traders to benefit from their investments based on trend analysis.
Technical analysis today is centered around three main ideologies:
1. The Markets Discount Everything
There are many experts who disapprove this approach of analyzing because it ignores fundamental factors while only considering the movement of prices. Technical analysts believe that everything from market psychology to broad market factors to a company’s fundamentals is all priced in the stock removing the need to consider each element separately when making investment decisions. The only thing that remains is analyzing price movements, something that technical analysts think to be a product of supply and demand for a specific stock.
2. Bitcoin Price Moves in Trends
According to technical analysts, prices move in long, medium, and short-term trends. In layman’s language, this means that stock prices will most likely continue following a past trend than start moving erratically. Most strategies, when it comes to technical trading, support this assumption.
3. History Repeats Itself
According to technical analysts, history often repeats itself. The reason why price movements tend to be repetitive is usually credited to market psychology, which is entirely predictable since it is based on emotions like excitement or fear. Technical analysis employs the use of chart patterns to evaluate these emotions and the ensuing movements in the market to understand the trends. While most types of technical analysis have been used in use for over a century, they’re still believed to be relevant today because they demonstrate price movement patterns that continually repeat themselves.
How Bitcoin Technical Analysis Is Employed
Technical analysis tries to forecast how the prices of virtually any tradable instrument subject to the forces of supply and demand, which includes Bitcoin price and cryptocurrency pairs such as ltc/usd or BTC/TUSD ect Some people view technical analysis as the study of the forces that drive supply and demand as reflected in a security’s market price movements. Technical analysis generally only applies to price changes; however, there are analysts who, apart from prices, track numbers such as open interest figures and trading volumes.
There are hundreds of signals and patterns across the industry designed by researchers to provide support to technical analysis trading. Some analysts have also come up with various trading systems that help them predict movements and trade as prices move. Some price movement indicators are primarily focused on identifying current market trends, including resistance areas and support, while others focus on determining a trend’s strength and how likely it is it will continue. Commonly used charting patterns and technical indicators include channels, momentum indicators, trendlines, and moving averages.
Technical analysts generally consider the following types of indicators:
- Chart patterns
- Price trends
- Momentum and volume indicators
- Support and resistance levels
- Moving averages
Technical Vs. Fundamental Analysis
Technical and fundamental analysis, the two leading schools of thought when looking at the markets, are two opposites with each on the end of the spectrum. Both approaches are used for forecasting and researching future stock price trends, and like any investment philosophy or strategy, both have their adversaries and advocates.
Fundamental analysis is where securities are evaluated by trying to measure a stock’s intrinsic value. Fundamental analysts are the professionals who study everything from industry conditions and overall economy to the management of companies and financial situation. Expenses, earnings, liabilities, and assets are all essential aspects to fundamental analysts.
Technical analysis, on the other hand, is different from fundamental analysis in that stock volume and prices are the only things considered. The core supposition is that all the fundamentals are part of the cost. As such, there’s no need to pay too much attention to them. As a result, technical analysts don’t try to measure the intrinsic value of a stock but use stock charts to detect trends and patterns suggestive of what the stock will do in future days.
Technical Analysis Limitations
The main obstacle to technical analysis’ legitimacy is the economics principle of the hypothesis of efficient markets. According to the Efficient Market Hypothesis, market prices reflect both past and current information, which means there’s no way to take advantage of mispricings or patterns to earn additional profits. Fundamental analysts and economists who believe in efficient markets don’t think that there is actionable information contained in historical volume data and prices. At the same time, they don’t believe that history does repeat itself when it comes to market trends and that prices only move randomly.
The second vilification of technical analysis lies in the fact that it works in some instances but only because it establishes a self-fulfilling truth. For example, a lot of technical traders will place stop-loss orders below a specific company’s 200-day moving average. If a considerable number of traders do so, and the stock ends up reaching the price, there’ll be a substantial number of sell orders, something that will eventually cause the stock to go down, confirming the price movement the traders expected. When that happens, other traders will note the decrease in price and start selling their positions, which in turn reinforces the trend’s strength. This selling pressure, though short-term, is considered self-fulfilling. However, it is worth noting that it has little bearing on where the price of the asset with be in the coming weeks or months. All in all, if enough traders used the signals, they’d cause the foretold movement, but in the long run, this small group of traders can’t drive prices.
Remember when using tradingview to chart bitcoin you can follow us and many of our charts to learn more about crypto trading.
We are now providing a newsletter for the Arcane Bear's Private Den members. We are in the process of on-boarding writers and other creatives in the investment space, to build the best profile and information we are capable of delivering. There will be crypto reviews, charting, research, plus many new projects and ideas to share and learn about. All while sharing the journey with others. If we work together, we can build a useful educational portal for blockchain and cryptocurrency ideas. Through decentralization, our group and community have the ability to curate the content needed. If you are a talented writer, or someone simply excited enough about this space to want to help, please get in touch with us! We are looking for new or existing members of the bear family to join in creating these portals of learning. “It takes a village to raise a child”, is a great quote, and together with our new decentralized ecosystem, we can grow and nurture it together!
Disclaimer for The Arcane Bear
If you require any more information or have any questions about our site’s disclaimer, please feel free to contact us at our help desk firstname.lastname@example.org
Disclaimers for www.arcanebear.com
All the information on this website is published in good faith and for general information purpose only. www.arcanebear.com does not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information you find on this website (www.arcanebear.club), is strictly at your own risk. www.arcanebear.club will not be liable for any losses and/or damages in connection with the use of our website.
The information provided a The Arcane Bear and accompanying material is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs.
The Arcane Bear does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, The Arcane Bear disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.
Content contained on or made available through the website is not intended to and does not constitute legal advice or investment advice and no attorney-client relationship is formed. Your use of the information on the website or materials linked from the Web is at your own risk.
From our website, you can visit other websites by following hyperlinks to such external sites. While we strive to provide only quality links to useful and ethical websites, we have no control over the content and nature of these sites. These links to other websites do not imply a recommendation for all the content found on these sites. Site owners and content may change without notice and may occur before we have the opportunity to remove a link which may have gone ‘bad’.
Please be also aware that when you leave our website, other sites may have different privacy policies and terms which are beyond our control. Please be sure to check the Privacy Policies of these sites as well as their “Terms of Service” before engaging in any business or uploading any information.
By using our website, you hereby consent to our disclaimer and agree to its terms.
Should we update, amend or make any changes to this document, those changes will be prominently posted here.
Thank you, you have no become a part of the development of our new trading space together.
For this, we are extremely Grateful!
The Entire Bear Council
The information on this site is for educational purposes only and is not investment or financial advice. Please do your own research before making any investment decisions. None of the information on this website constitutes, or should be relied on as, a suggestion, offer, or other solicitation to engage in, or refrain from engaging in, any purchase, sale, or any other any investment-related activity with respect to any cryptocurrency or other transaction.
Cryptocurrency investments are volatile and high risk in nature.
Don't invest more than what you can afford to lose.
We are not paid to do any reviews, but we do take positions in projects that we believe are promising.
Arcane Bear makes no representations, warranties, or assurances as to the accuracy, currency or completeness of the content contained in this website or any sites linked to or from this website.
Terms and Conditions
PLEASE READ THESE TERMS AND CONDITIONS ("TERMS") CAREFULLY BEFORE USING THE SERVICES DESCRIBED HEREIN.
BY UTILIZING THE WEBSITE LOCATED AT www.arcanebear.com ("WEBSITE") AND PRODUCTS THEREIN, YOU ACKNOWLEDGE THAT YOU HAVE READ THESE TERMS AND CONDITIONS AND THAT YOU AGREE TO BE BOUND BY THEM. IF YOU DO NOT AGREE TO ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT, YOU ARE NOT AN AUTHORIZED USER OF THESE SERVICES AND YOU SHOULD NOT USE THIS WEBSITE OR ITS PRODUCTS. ARCANE BEAR RESERVES THE RIGHT TO CHANGE, MODIFY, ADD OR REMOVE PORTIONS OF THESE TERMS AT ANY TIME FOR ANY REASON. WE SUGGEST THAT YOU REVIEW THESE TERMS PERIODICALLY FOR CHANGES. SUCH CHANGES SHALL BE EFFECTIVE IMMEDIATELY UPON POSTING. YOU ACKNOWLEDGE THAT BY ACCESSING OUR WEBSITE AFTER WE HAVE POSTED CHANGES TO THESE TERMS, YOU ARE AGREEING TO THE MODIFIED TERMS. THIS DISCLAIMER OR ANY OTHER DOCUMENT, PRODUCED AND SIGNED BY ARCANE BEAR, DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO SELL ANY SHARES OR SECURITIES OR THE PRODUCTS OFFERED THERETO. NONE OF THE INFORMATION OR ANALYSES PRESENTED ARE INTENDED TO FORM THE BASIS FOR ANY INVESTMENT DECISION, AND NO SPECIFIC RECOMMENDATIONS ARE INTENDED, AND ARCANE BEAR SERVICES AND THE WEBSITE ARE NOT, DO NOT OFFER AND SHALL NOT BE CONSTRUED AS INVESTMENT OR FINANCIAL PRODUCTS. ACCORDINGLY, ARCANE BEAR DOES NOT PROVIDE INVESTMENT ADVICE OR COUNSEL OR SOLICITATION FOR INVESTMENT IN ANY CRYPTOCURRENCY AND/OR SECURITY AND SHALL NOT BE CONSTRUED IN THAT WAY. ARCANE BEAR EXPRESSLY DISCLAIMS ANY AND ALL RESPONSIBILITY FOR ANY DIRECT OR CONSEQUENTIAL LOSS OR DAMAGE OF ANY KIND WHATSOEVER ARISING DIRECTLY OR INDIRECTLY FROM: (I) RELIANCE ON ANY INFORMATION PRODUCED BY ARCANE BEAR, (II) ANY ERROR, OMISSION OR INACCURACY IN ANY SUCH INFORMATION OR (III) ANY ACTION RESULTING THEREFROM, (IV) USAGE OR ACQUISITION OF PRODUCTS, AVAILABLE THROUGH THE WEBSITE.
Arcane Bear retains all right, title and interest in all of our intellectual property, including inventions, discoveries, processes, marks, methods, compositions, formulae, techniques, information and data, whether or not patentable, copyrightable or protectable in trademark, and any trademarks, copyrights or patents based thereon. You may not use any of our intellectual property for any reason, except with our express, prior, written consent.
All content included on the Website and associated products and services, such as, but not limited to, text, graphics, logos, and images is the property of Arcane Bear and protected by copyright, trademark and other laws that protect intellectual property and proprietary rights. You agree to observe and abide by all copyright and other proprietary notices, legends or other restrictions contained in any such content and will not make any changes thereto.
Access to the Website
The Arcane Bear Website is provided without warranty of any kind, either express or implied. We do not represent that the Website will be available 100% of the time to meet your needs. In case of interruptions we take all reasonable actions to provide you with access to the Website as soon as possible, but there are no guarantees that access will not be interrupted, or that there will be no delays, failures, errors, omissions or loss of transmitted information. We may suspend use of the Website at any time for maintenance.