CryptoPotato
  • Beginners
  • Guides
  • Trade
  • ICO List
    • ICO List
    • ICO Evaluations
    • Airdrops
  • Crypto News
  • Buy
  • Language
    • עברית
    • Deutsch
    • हिन्दी
    • Español
  • Bitcoin For Beginners
  • Investor’s Guides
  • The ICO List
  • ICO Evaluations
  • Airdrops
  • Bitcoin BTC Price Analysis
  • Ethereum ETH Price Analysis
  • Ripple XRP Price Analysis
  • Crypto News
  • Market Updates
  • Interviews
  • Buy Bitcoin with Credit Card
  • עברית
  • Deutsch
  • हिन्दी
  • Español
  • bitcoin
    BTC$3,617.75
  • ethereum
    ETH$122.57
  • bitcoin
    BTC$3,617.750.158%
  • ethereum
    ETH$122.570.156%
    • #Market Updates
    • #BTC Analysis
    • #ETH Analysis
    • #XRP Analysis
    • #Interviews
    Bitcoin and Crypto Technical Analysis For beginners
    Home » Crypto Trader Guides » Bitcoin and Crypto Technical Analysis For beginners

    Bitcoin and Crypto Technical Analysis For beginners

    Author: Yuval Gov Last Updated On Jan 31, 2019 @ 14:01 UTC

    Crypto traders have several tools to assess the cryptocurrency market. One of them is an approach known as Technical Analysis. Using this method, traders can get a better understanding of the market sentiment and isolate significant trends in the market. This data can be used to make more educated predictions and wiser trades.

    Tech analysis considers the history of a coin with price charts and trading volumes, no matter what the coin or project does. As opposed to technical analysis, fundamental analysis is more focused on establishing if a coin is over or under valued.

    To get a better idea of technical analysis, it is crucial to understand the fundamental ideas of Dow Theory that tech analysis is based on:

    1. The market considers everything in its pricing. All existing, prior, and upcoming details have already been integrated into current asset prices. With regards to Bitcoin and crypto, this would be comprised of multiple variables like current, past, and future demand, and any regulations that impact the crypto market. The existing price is a response to all the current details, which includes the expectations and knowledge of each coin traded in the market. Technicians interpret what the price is suggesting about market sentiment to make calculated wise predictions about future pricing.
    2. Prices movement aren’t random. Rather, they often follow trends, which may either be long or short-term. After a trend is formed by a coin, it’s probably going to follow that trend to oppose it. Technicians try to isolate and profit from trends using technical analysis.
    3. ‘What’ is more important than ‘Why’. Technicians are more focused on the price of a coin than each variable that produces a movement in its price. Although multiple aspects could have influenced the price of a coin to move in a specific direction, Technicians assertively review supply and demand.
    4. History tends to get repeated. It is possible to predict market psychology. Traders sometimes react the same way when presented with similar stimuli.

    Trend Lines

    Trend lines, or the typical direction that a coin is moving towards, can be most beneficial for traders of crypto. That said, isolating these trends can be easier said than done. Crypto assets might be substantially volatile, and watching a Bitcoin or crypto price movement chart will probably reveal a selection of highs and lows that form a linear pattern. With that in mind, Technicians understand that they can overlook the volatility and find an upward trend upon seeing a series of higher highs, and vice versa – they can identify a downtrend when they see a series of lower lows.

    Additionally, there are trends that move sideways, and in these cases, a coin doesn’t move significantly in either direction. Traders should be mindful that trends come in many forms, including intermediate, long and short term trend lines.

    lines

    Important tip: you must be accurate when drawing these trend lines! How to do it perfectly? As you hover each candle you will notice the lowest price of it marked as “L” in the top bar (or the highest price, “H”, if line’s direction is down). Now place your line exactly there. Next, extend the line roughly, as it touches the next candle in the trend line, do the same – check exactly the “L” for that candle. Now correct your line. Final step is to auto-extend the line using line’s Settings – Line extend to the desired side (probably right). This explain was for Coinigy charts, but should work well with other chart applications.

    Resistance and support levels

    As there are trend lines, there are also horizontal lines that express levels of support and resistance. By identifying the values of these levels, we can draw conclusions about the current supply and demand of the coin. At a support level, there seems to be a considerable amount of traders who are willing to buy the coin (a large demand), i.e., those traders believe that the currency is priced low at this level and therefore will seek to buy it at that price. Once the coin reaches close to that level, a “floor” of buyers is created. The large demand usually stops the decline and sometimes even changes the momentum to an upward trend. A level of resistance is exactly the opposite – an area where many sellers wait patiently with their orders, forming a large supply zone. Every time the coin approaches that “ceiling”, it encounters the supply stacks and goes back.

    There is often a situation in which trade-offs can be between support and resistance levels: gathering close to support lines and selling around the resistance level. This opportunity usually takes place when lateral movement is identified.

    So what happens during breakout of resistance or support level? There is high probability that this is an indicator which is strengthening the existing trend. Further reinforcement of the trend is obtained when the resistance level becomes support level, and being tested from above shortly after the breakout.

    Note: False breakouts occur when a breakout happens, but the trend doesn’t change. Hence, we must use some more indicators, such as trading volume, to identify the trend.

    eng_resistanceH1

    Moving averages

    Another technical analysis tool for crypto currencies and technical analysis in general, in order to simplify trend recognition, is called moving averages. A moving average is based on the average price of the coin over a certain period of time. For example, a moving average of a given day will be calculated according to the price of the coin for each of the 20 trading days prior to that day. Connecting all moving averages forms a line.

    It is also important to recognize the exponential moving average (EMA), a moving average that gives more weight in its calculation to the price values of the last few days than the previous days. An example is the calculation coefficient of the last five trading days of EMA 15 days will be twice that of the previous ten days.

    In the following graph we can see a practical example: If a 10-day moving average crosses above a 30-day moving average it might tell us a positive trend is coming.

    eng_ma2H

    Trading Volume

    Trading volume plays an important role in identifying trends. Significant trends are accompanied by a high trading volume, while weak trends are accompanied by a low trading volume. When a coin goes down it is advisable to check the volume which accompanied the decline. A long-term trend of healthy growth is accompanied by a high volume of increases and a low volume of declines. It is also important to see that volume is rising over time. If the volume is decreasing during increases, the upward trend is likely to come to an end, and vice versa during a down trend.

    eng_vol2

    Not on the technical analysis alone

    Using technical analysis, traders can identify trends and market sentiment and they also have the ability to make wiser investment decisions. However, there are a number of key points to consider:

    Technical analysis is a practical method that weighs past prices of certain coins and their trading volume. When considering entering a trade, it is not recommended that you only rely on technical analysis. Especially in the field of crypto, a field that often generates news, there are fundamental factors that have a significant impact on the market (such as regulations, ETF certificates, mining hash, etc.). Technical analysis only ignores and can’t predict these factors, so the recommendation is to mix together the technical analysis and the fundamentals analysis to make wise investment decisions.

    An analyst who makes a decision to buy a particular coin due to fundamental reasons can get technical support or find a good technical entry point and thus strengthen the trade’s ROI.

    From Theory to Implementation: How to start and identify trends?

    In order to get started, we need an analytics tool that draws graphs quickly and easily. You can use the existing graphs of the crypto exchanges, but they don’t provide trend lines and they only provide partial indicators.


    TradingView: The well-known graph and charting service, with wide variety of options. Mostly free, except from premium paid features.

    Coinigy provides a comprehensive charting service among all trading coins and crypto exchanges. You can register following this link and get 30 days free trial.

    This guide had presented the basic concepts in technical analysis among crypto. It is recommended that you deepen your knowledge in the field if you wish to implement tech analysis: indicators, Fibonacci levels, patterns (triangles, for example), and more. In our following featured article you will read about 8 tips for trading crypto. Some touch the technical aspect.

    December 2017 update: We recently published an advanced guide for crypto technical analysis.

    Click here to start trading on BitMEX exchange and receive 10% discount on fees for 6 months.

    Be the first to know about our price analysis, crypto news and trading tips: Follow us on Telegram or subscribe to our weekly newsletter.

    More news for you:

    What is Ethereum 2.0? We Reveal its Unclear, Uncertain, Yet Promising Future
    By Arnon Benshahar  /  Feb 15, 2019

    What is Ethereum 2.0? We Reveal its Unclear, Uncertain, Yet Promising Future

    BitMEX Recorded $1 Trillion in Trading Volume (Notional Annual)
    By Toju Ometoruwa  /  Feb 15, 2019

    BitMEX Recorded $1 Trillion in Trading Volume (Notional Annual)

    If You Can’t Beat Them, Join Them: JP Morgan Creates Its JPM Cryptocurrency
    By Toju Ometoruwa  /  Feb 14, 2019

    If You Can’t Beat Them, Join Them: JP Morgan Creates Its JPM Cryptocurrency

    Ethereum (ETH) Price Analysis Feb.14: Ethereum Consolidates Around $120. What’s Next?
    By Yaz Sheikh  /  Feb 14, 2019

    Ethereum (ETH) Price Analysis Feb.14: Ethereum Consolidates Around $120. What’s Next?

    CZ, CEO of Binance: A Major Exchange Attacked Us When We Were Small
    By Ali Raza  /  Feb 14, 2019

    CZ, CEO of Binance: A Major Exchange Attacked Us When We Were Small

    BTC Short Positions Are Reaching Historical Long-Term Support: Bitcoin Price Analysis Feb.14
    By Yuval Gov  /  Feb 14, 2019

    BTC Short Positions Are Reaching Historical Long-Term Support: Bitcoin Price Analysis Feb.14

    Crypto Adoption Ahead: NASDAQ to Add New Bitcoin (BTC) and Ethereum (ETH) Indices
    By Toju Ometoruwa  /  Feb 13, 2019

    Crypto Adoption Ahead: NASDAQ to Add New Bitcoin (BTC) and Ethereum (ETH) Indices

    Investments: Marijuana Explosion – What to Expect from Canopy Growth Corp Upcoming Reports on Feb.14?
    By Toju Ometoruwa  /  Feb 13, 2019

    Investments: Marijuana Explosion – What to Expect from Canopy Growth Corp Upcoming Reports on Feb.14?

    Litecoin’s Extraordinary Week: Following 30% Weekly Gains, Litecoin (LTC) Price Analysis Feb.13
    By Yaz Sheikh  /  Feb 13, 2019

    Litecoin’s Extraordinary Week: Following 30% Weekly Gains, Litecoin (LTC) Price Analysis Feb.13

    Crypto Market Update Feb.12: Bitcoin Dominance Declines as Altcoins Skyrocket
    By Yoni Berger  /  Feb 12, 2019

    Crypto Market Update Feb.12: Bitcoin Dominance Declines as Altcoins Skyrocket

    Weekly Price Analysis Overview Feb.12: Bitcoin, Ethereum, Ripple, Dash and Monero
    By Yoni Berger  /  Feb 12, 2019

    Weekly Price Analysis Overview Feb.12: Bitcoin, Ethereum, Ripple, Dash and Monero

    Craig Wright Gets Caught Lying About Being Satoshi Nakamoto (Not The First Time)
    By Toju Ometoruwa  /  Feb 12, 2019

    Craig Wright Gets Caught Lying About Being Satoshi Nakamoto (Not The First Time)

    BNB Broke The All-Time High: Following 40% Weekly Gains, Binance Coin Price Analysis Feb.12
    By Yaz Sheikh  /  Feb 12, 2019

    BNB Broke The All-Time High: Following 40% Weekly Gains, Binance Coin Price Analysis Feb.12

    Binance DEX Soon To Be Launched: The Testnet Launch Event Is Set for February 20, Says CZ
    By Ali Raza  /  Feb 12, 2019

    Binance DEX Soon To Be Launched: The Testnet Launch Event Is Set for February 20, Says CZ

    Bitcoin Price Analysis Feb.12: Bitcoin Sideways Action – Soon To Form Another Bart Simpson?
    By Yuval Gov  /  Feb 12, 2019

    Bitcoin Price Analysis Feb.12: Bitcoin Sideways Action – Soon To Form Another Bart Simpson?

    False Hope? Brock Pierce Led MT.Gox Rehabilitation Feared to Be Fraudulent (Here Is Why)
    By Toju Ometoruwa  /  Feb 11, 2019

    False Hope? Brock Pierce Led MT.Gox Rehabilitation Feared to Be Fraudulent (Here Is Why)

    The $190 Million Dollar Question: The Known & Unknown About QuadrigaCX Exchange Mystery
    By Benjamin Vitáris  /  Feb 11, 2019

    The $190 Million Dollar Question: The Known & Unknown About QuadrigaCX Exchange Mystery

    ETH Becomes The 2nd Largest Crypto And Faces Major Resistance: Ethereum Price Analysis Feb.11
    By Jonathan Goldman  /  Feb 11, 2019

    ETH Becomes The 2nd Largest Crypto And Faces Major Resistance: Ethereum Price Analysis Feb.11

    SEC Clarifies: “Tokens Sold in a Functioning Network Are Not Securities” – What Does This Mean For The Crypto Regulations?
    By Toju Ometoruwa  /  Feb 10, 2019

    SEC Clarifies: “Tokens Sold in a Functioning Network Are Not Securities” – What Does This Mean For The Crypto Regulations?

    Bitcoin Price Analysis Feb.10: Bitcoin Struggles To Stay Above $3600, Facing The Critical Resistance
    By Yuval Gov  /  Feb 10, 2019

    Bitcoin Price Analysis Feb.10: Bitcoin Struggles To Stay Above $3600, Facing The Critical Resistance

    About the Author

    Yuval Gov View all posts by Yuval Gov

    Yuval Gov has over 15 years of trading experience in the stock exchange, graduated from TAU - Economics and Management. Breathing and doing Crypto projects since 2013. Does Crossfit to get away from FOMO. Contact Yuval: LinkedIn

    « Previous Post
    Next Post »

    Comments

    Join Our Community

    • Facebook

    • Twitter

    • YouTube

    • Telegram


    Recent Reviews
    bitmex
    9.7
    etoro
    8.8
    plus500 *
    8.5

    Recent Articles
    The Bitcoin Chart 2017-2018: The Best Lessons you can learn About Trading Psychology, Discipline and Bubbles

    The Bitcoin Chart 2017-2018: The Best Lessons you can learn About Trading Psychology, Discipline and Bubbles

    Binance Jersey – Beginner’s Guide to To The FIAT-Crypto Exchange

    Binance Jersey – Beginner’s Guide to To The FIAT-Crypto Exchange

    What Is a Death Cross? And What’s The Relation To BTC Breaking Down From The $6K Area In 2018?

    What Is a Death Cross? And What’s The Relation To BTC Breaking Down From The $6K Area In 2018?

    The Origins of Economic Decision Bias and How They May Relate to The 2017 Bitcoin Bubble

    The Origins of Economic Decision Bias and How They May Relate to The 2017 Bitcoin Bubble

    CloudBet
    Become a CryptoPotato VIP

    Receive our market updates and crypto trading tips and news by email (We hate spam, and send max of 1 weekly mail):

    Become a CryptoPotato VIP
    Receive our special crypto tips and news by email: We hate spam, and send max of 1 weekly mail
    About
    About Us | Contact Us

    Advertise on CryptoPotato

    Terms of service | Privacy Policy | GDPR

    Scholarship
    Disclaimer
    Recommendations and Information found on Cryptopotato are those of writers quoted. It does not represent the opinions of Cryptopotato on whether to buy, sell or hold any investments. Investors should be cautious about any recommendations given. All investors are advised to conduct their own independent research into individual coins before making a purchase decision. Use information at your own risk.
    © Copyright Cryptopotato Team 2016
    Scroll to top