Crypto trading analysis seeks to gain an in-depth knowledge of an asset’s price trend and trading activity. This can be accomplished using on-chain analysis that examines blockchain data or fundamental analysis which considers an asset’s real world applications.
Traders utilize tools such as indicators, trend lines, and indices to identify possible setups for trades. A reversal candlestick with high volume at either an uphold or resistance line might provide the perfect entry opportunity.
Ichimoku Cloud
Non-traders might imagine an Ichimoku cloud to be an unruly collection of lines and colors; however, this indicator is actually quite logical and when combined with other indicators can help traders spot trends quickly and identify trading signals.
Ichimoku Clouds are a unique system that displays past, present and potential future price movements on one chart. Their components include Tenkan Sen and Kijun Sen conversion lines as well as moving average of both lines calculated over 26 periods and their leading span A of the Ichimoku system (Senkou Span A).
Signals generated when Tenkan Sen crosses above Kijun Sen are considered buy signals; when this occurs to the downside it indicates sell signals. Ichimoku cloud itself changes color when prices move above it while red when prices fall below. Breakthrough of Ichimoku clouds is often taken as an indication that trends are shifting and this price action signals a possible turnaround in trend direction.
On-Balance Volume (OBV)
Joseph Granville created the On-Balance Volume (OBV), an indicator that measures momentum and predicts movement of “smart money” based on volume analysis. To calculate OBV, one adds volume on up days and subtracts it on down days until reaching a cumulative total that allows traders to spot trend reversals or confirm existing trends.
When the OBV line rises with price increases, this signals smart investors who have realized market weakness as an opportunity. Conversely, when down price movements coincide with an increasing OBV line reading it indicates market bottoming out and buyers beginning to purchase again.
However, as a leading indicator, OBV may produce false signals; to make better decisions using other predictive indicators like moving averages and trend lines instead. By doing so, traders can avoid losing profits due to incorrect prevailing trends while simultaneously identifying strong support and resistance levels.
Price History
Cryptocurrency prices can be unpredictable and this can result in large price swings for each coin. When this occurs, it indicates whether the market is moving upward or downward and can help predict when trading conditions may turn bullish (upward) or bearish (downward).
Price history of a coin is the record of its gradual fluctuations over time, used by traders to analyze crypto market trends and to make informed trading decisions. For instance, traders using bitcoin’s price history can see that it has experienced multiple highs and lows – when its price reached certain thresholds before dropping back below them again.
Price histories of cryptocurrency assets can also help determine support and resistance levels. These levels represent where prices tend to rebound when falling below them; you can see these levels on charts as support/resistance lines which act like battle lines between bulls and bears.
Trend Lines
Traders utilize trend lines to pinpoint price levels they might want to buy or sell a cryptocurrency at. By combining them with other tools, traders increase their odds of success while increasing profitability and maximizing returns from trades.
Trend lines are formed by joining the highs or lows on a chart together, whether uptrend or downtrend. When in an uptrend, traders draw an uptrend line connecting higher lows; when in a downtrend they connect lower highs; more times than not the prices remain within this line, making it stronger and more valid over time.
Traders must recognize that creating a trend line is subjective and potentially misleading, so they should aim at drawing one that touches prices more than once to reduce subjectiveness. Furthermore, volume trading impacts its reliability; more people trade, the more likely it is that someone breaks it and alters market direction.
