Cryptocurrencies are more speculative than stocks, and assigning a valuation based on real-world data can be challenging. Luckily, there are tools that make this process simpler.
Nansen provides SQL query-based access to on-chain data from popular blockchains. It’s an ideal tool for novice and intermediate traders and investors.
Trend lines
Trend lines are one of the most crucial tools available to traders, as they allow them to accurately represent asset trends on charts while acting as support or resistance levels. By drawing these lines on their chart, traders can use trend lines to spot trading opportunities more efficiently and increase their chances of making profitable trades.
Trend lines are created by connecting successive higher or lower troughs or highs on a price chart, the more of them it connects the stronger it becomes. Also important is drawing the trendline over closed candles for maximum effect; multiple trendlines may appear simultaneously on one chart but only the strongest should be used as trendlines.
Lines are an indispensable component of technical analysis and can be applied to virtually any asset or timeframe. However, it should be remembered that lines do not offer 100% protection and could potentially break at any point; to maximize risk-reward performance it is recommended to combine this tool with other indicators and a good risk-reward ratio.
Moving averages
Moving averages are an indispensable tool in crypto trading analysis, helping traders navigate the market based on data. Unfortunately, though, they also can be seen as lagging indicators and should therefore be used alongside other technical analysis tools for the most accurate results.
Traders can utilize moving averages to identify trends, determine support and resistance levels, generate trading signals for their strategies, and create custom indicators – they can experiment with various types of moving averages until they find one that best matches their trading style and market conditions.
The 200-day moving average is the go-to choice when analyzing cryptocurrency markets as its data helps uncover short-term price fluctuations while uncovering long-term trends within certain time frames. This method helps filter out short-term fluctuations and reveal any underlying patterns or trends within an established time period that might otherwise remain hidden – an invaluable source of knowledge when forecasting where prices might head in the future.
Fibonacci retracements
Fibonacci Retracements are a key tool of technical analysis. Their name derives from the Fibonacci sequence – an alternating series of numbers and ratios found throughout nature and history. While no guarantees can be given about whether this particular technique will work successfully in trading, fibonacci levels provide support and resistance levels that can assist price movements when used alongside other technical tools like moving averages and oscillators.
Fibonacci Retracement levels allow traders to predict potential support and resistance levels based on past prices of their crypto assets, or as part of other indicators like trend lines or candlestick patterns. They can also be combined with trend lines or candlestick patterns. It should be noted, however, that Fibonacci retracement levels may not provide accurate representation in smaller markets with limited trading volumes due to less transaction data impacting price movements; as a result of which, ratios may not be reliable in such instances.
Support and resistance levels
Support and resistance levels on a price chart represent areas in which buyers (demand) and sellers (supply) tend to act, often in tandem. There are various techniques used to identify support and resistance points on charts; horizontal lines, trend lines, moving averages, Fibonacci tools, or Ichimoku clouds may help, but ultimately it comes down to one simple concept: once price hits one of these recognized resistance or support levels it may respond in certain ways.
Typically, cryptocurrency prices tend to rebound when they reach support and resistance levels due to investors viewing them as bargains that encourage more purchases than sells. When prices reach resistance levels, however, they generally stop falling much further due to investors not willing to sell off assets at such levels – although these levels don’t tend to be exact in price point terms and can vary by up to a few percentage points; should one break, this could become known as an S/R flip which provides insight into future movement of cryptocurrency prices.
