Investing is about considering a myriad of factors at once, with access to data being at the center of importance – the more data you have, the easier it is to make intelligent decisions. Investing in cryptocurrency is slightly different, however, as there is very little (if any) fundamental data to discern. No earnings reports, no profits/sales to monitor, very few valuation metrics to analyze.
In the absence of fundamental analysis, it is technical analysis that becomes the primary source of data used for trading. Indeed, technical and chart analysis can help make sense of price trends and allow us to anticipate market shifts. Once patterns are identified, one can apply some simple math to make smarter decisions about how to buy and sell intelligently.
Once an investor considers the value of technical analysis and chart trading, the question then becomes: is reading charts good enough?
The answer, I believe, is no. One must have a method for testing results and obtaining statistics to measure the efficacy of their technical trading process. Without statistics, the strategy is little more than guesswork.
Tickeron’s Artificial Intelligence is an example of technical analysis and chart-reading strategy that keeps statistics on predictions and also backtests patterns to see how effective they would have been. That includes but is not limited to the percentage of time the security reached its target price, the % gain or loss on the trade based on the AI’s advice, number of days the security remained in the pattern, and more. Having hard data can not only prove the efficacy of AI technology, but it can also help the trader decide whether they think the risk is worth taking.
Are you new to technical analysis and trading? Here are some basic terms and concepts to help you get started:
Channels
The space between the two parallel lines is called a channel. Within the channel, there can be ascending (highs are higher, lows are lower), descending (lower highs and lows), or horizontal (equal highs and lows) trends. To maximize your return, buy crypto when the price touches the support line and sell when it hits the resistance line. Breakouts are possible in bull and bear markets, but channels will generally be indicative of broader tendencies.
Triangles
If your resistance and support lines make a triangle shape, this usually means the market is somewhat unsettled. There are three different kinds of triangles: symmetrical (the market will likely continue whichever way it breaks the trendlines at the point of the triangle), ascending (prices will probably break the resistance line when it is horizontal), and descending (prices are expected to continue decreasing when they break a horizontal support line).
Other patterns
There are numerous patterns that can also help us recognize market evolutions. These include flags (typically occurring after periods of fast growth when prices rally sharply and then move to the downside. Sharp price rises preceding the flag shape are called flag poles; traders look for the price breaking out above the trendlines and enter a long trade), Eliott waves (used in tandem with a mathematical calculation called a Fibonacci retracement, Eliott waves can show us good buy markets), and candlestick patterns (a technique derived from 18th century Japanese rice traders that packs data from multiple time frames into single price bars, making it easier to predict price directions
Mathematical indicators
It is useful to familiarize yourself with some basic mathematical indicators that help us identify when to buy and sell a security. A couple of the most common is called a Simple Moving Average (SMA) and a Relative Strength Index (RSI).
SMAs are based on the average of multiple time periods – to calculate, add the closing price of the cryptocurrency over a number of time periods, then divide the total by the total number of time periods. When the SMA points up, the price is increasing and down signifies a decrease. Longer timeframes mean smoother moving averages.
RSIs can tell us whether cryptocurrency is being overbought or oversold, giving us a relative evaluation of recent performance. It is calculated through a formula that divides average growth by average decreases. An RSI of 70 or above indicates overvalue, and likely downward price correction. RSIs 30 or below often indicate the inverse.
These are just some of the patterns and indicators can make you a better cryptocurrency investor – the more you learn, the easier it is to make the right moves in dynamic markets.
BTC.X moved below its 50-day moving average on April 13, 2024 date and that indicates a change from an upward trend to a downward trend. In of 42 similar past instances, the stock price decreased further within the following month. The odds of a continued downward trend are .
The Stochastic Oscillator has been in the overbought zone for 2 days. Expect a price pull-back in the near future.
The Momentum Indicator moved below the 0 level on April 28, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on BTC.X as a result. In of 135 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The 10-day moving average for BTC.X crossed bearishly below the 50-day moving average on April 17, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 19 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where BTC.X declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Aroon Indicator for BTC.X entered a downward trend on May 07, 2024. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options.
The RSI Indicator points to a transition from a downward trend to an upward trend -- in cases where BTC.X's RSI Indicator exited the oversold zone, of 28 resulted in an increase in price. Tickeron's analysis proposes that the odds of a continued upward trend are .
The Moving Average Convergence Divergence (MACD) for BTC.X just turned positive on May 05, 2024. Looking at past instances where BTC.X's MACD turned positive, the stock continued to rise in of 58 cases over the following month. The odds of a continued upward trend are .
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where BTC.X advanced for three days, in of 439 cases, the price rose further within the following month. The odds of a continued upward trend are .
BTC.X may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows