Cryptocurrency prices move quickly, making it hard for traders to keep pace. But learning to read cryptocurrency charts can help predict price movements and reveal profitable trading opportunities.
Trend lines can help traders more quickly identify cryptocurrency support and resistance levels. Candlestick bodies and wicks also serve as helpful indicators.
Fundamental Analysis
But while crypto market fluctuations can be unpredictable, discovering undervalued assets can be rewarding experience. To do so effectively requires making smart investment decisions based on fundamental analysis that account for factors like team members, development roadmap and use cases of any particular project.
Technical analysis emphasizes human behavior within an economy and its associated patterns; fundamental analysis addresses an asset’s true worth by taking into account both intrinsic and growth potential value.
Fundamental analysis may seem complex and time consuming at first, but it’s essential in crypto trading. Doing it allows you to avoid becoming caught up in emotions like FOMO (fear of missing out) or excitement that can lead to bad decisions. While conducting fundamental analysis requires doing plenty of research, several tools such as Messari, Glassnode and other data aggregators exist that can assist.
Technical Analysis
Technical analysis refers to a method of using existing market data to predict future trading asset trends. It involves looking at factors like price trends and patterns, chart patterns, indicators and oscillators as well as volume.
So for instance, when reviewing a cryptocurrency’s chart and seeing that its price has been steadily decreasing for months now, you could use an indicator or oscillator to help predict that its price might begin increasing again soon.
One popular indicator is the Relative Strength Index (RSI), which helps traders spot potential trends by examining an asset’s volatility. Another popular tool is stochastic oscillator, which signals overbought or oversold market conditions. Furthermore, you may use trend lines – lines connecting multiple high or low points on crypto charts – as another form of analysis; tools like Coinigy may assist in doing this analysis effectively.
On-Chain Analysis
On-chain analysis is an integral component of cryptocurrency trading. This practice involves closely scrutinizing blockchain transaction activity to assess investor sentiment and emerging market trends as well as helping traders and investors predict its future performance.
One of the key metrics for measuring network usage includes active addresses and total transactions in any one cryptocurrency. A rise could indicate that it is attracting more users and expanding.
Coin concentration, which indicates how much an asset is held by large “whales” and investors, can help minimize risk by alerting you of possible token dumps by these big players. Furthermore, looking at both on-chain volume and exchange-calculated volumes allows you to verify whether transactions reported actually took place; this step is essential since some exchanges manipulate data in order to create artificial trading volumes.
Socio-Economic Indicators
Crypto trading is an evolving industry and traders need to use social indicators and technical analysis tools to pinpoint market trends and opportunities.
On-Balance Volume (OBV) measures how many buyers and sellers are active in a market; high levels can indicate price increases while lower ones could signal market reversals. OBV can be used with other indicators to verify trading signals while minimizing false alarms.
Inflation is one of the key considerations in crypto trading and can have both positive and negative ramifications on cryptocurrency’s price. Unbacked assets like Bitcoin may be particularly susceptible to inflation while stablecoins tend to be resistant. Traders can track inflation rates through public data and statistics for informed trading decisions as well as gain a deeper understanding of macroeconomic implications of investments made therein.
