Technical analysis (TA) for cryptocurrency assets offers a way to identify trends on these assets. Although experienced TAs may provide Jedi-like insight into crypto markets, such insight may still be misleading as cryptocurrency is unregulated and news events can quickly overrule tendencies shown by charts.
Quantify Crypto uses existing real-world data to attempt to predict future price movements using tools derived from price and volume analysis. Quantify Crypto prioritizes cryptocurrency assets that provide sufficient liquidity and trading volume in order to make this worthwhile.
Price Action
Price action trading strategy involves closely monitoring market behavior to identify optimal entry and exit points. At its heart is the identification of imbalances in supply and demand that can be observed through various chart settings.
Price action trading allows traders to use various tools, including Relative Strength Index (RSI), moving averages, and chart patterns, to analyze potential trends or reversals in the cryptocurrency market.
Price action trading requires traders to recognize false signals and be ready for unexpected market volatility. They should combine price action trading with other types of technical analysis and risk management strategies in order to increase their chances of success.
Candlesticks
Cryptocurrency charts and candlestick patterns play an integral part in crypto trading, helping traders understand market trends and make strategic decisions. Candlestick charts also offer visual context that traditional line charts lack.
Candlestick analysis involves looking for certain patterns to provide insight into buying pressure or selling pressure; an inverted hammer indicates downward trending. An important aspect of candlestick analysis is support and resistance levels – these serve to limit an asset’s upward or downward movements by understanding their relationships to open, high, low, close prices; these relationships dictate the shape of candlestick bodies with shadows: long upper shadows indicate strong buying pressure while short lower shadows show the close was below low price levels.
RSI
RSI (Relative Strength Index) is an indicator that measures momentum and can help predict future price movements. Using an elaborate formula, it determines whether an asset has been overbought or oversold, with rising above 50 signalling an uptrend and falling below 50 signalling a downturn.
Typically, an RSI reading of 70 or higher signals overbought conditions while those below 30 indicate oversold ones; this rule may not always hold as markets can remain overbought/oversold for extended periods. Therefore, using multiple indicators together with the RSI is key.
Moving Averages
Moving averages are an effective tool used by traders to detect trends and potential support/resistance levels, smooth out price action by filtering out day-to-day fluctuations, and ensure price action doesn’t become overly volatile.
Moving averages can be calculated based on closing prices, highs and lows or some combination thereof. Your choice of moving average depends on your trading strategy; some traders favor simple moving averages (SMA), while other traders might favor exponential moving averages (EMA), which have weighting that emphasizes more recent data points.
A moving average line’s slope can also help identify trends. An upsloping line indicates an asset is in an upward trend while one that slopes downward suggests it could be heading downwards.
Chart Patterns
Chart patterns can provide valuable insights when analysing crypto assets. The theory behind this form of analysis holds that market participants tend to react in similar ways over time – meaning if a certain pattern has already come about before it may occur again in the near future.
Candlestick patterns with green bodies and long upper-wicks could signal that prices have recently increased; in contrast, red bodies with long lower wicks may suggest they will soon decrease. Other popular chart patterns include head and shoulders, double tops/bottoms, triangles and wedges. Furthermore, technical analysts can use trendlines that connect a cryptocurrency’s lowest and second-lowest lows over a given timeframe; points touching these trendlines serve as support and resistance levels.
