October 13, 2022

Crypto technical analysis: what is it, and how to do it right?

Whether you are a novice or a seasoned trader, learning how to analyze charts for trends is super important. When trading, you need to conduct some math to anticipate price changes. If you’re only placing buy or sell orders on hunches, your investment is at high risk. Therefore, crypto technical analysis is crucial for traders to gain insight into the market’s current state. 

Crypto technical analysis is a method of studying past price movements to forecast future price movements. The fundamental idea behind price action is that the price of a trading instrument does not move arbitrarily. Instead, there is a story behind the price movement, and investors can read the price history like a book and forecast what will happen next.

So we can say that a technical analyst looks at the flow, rhythm, and trends in price action.

The cryptocurrency market’s price fluctuates due to changes in supply and demand. When supply exceeds demand, the price falls; when demand exceeds supply, the price rises. However, the main question is when and how much the price will move. Technical analysts’ main job is looking at the whole market and determining where the price is most likely to move.

TA is the most dependable and effective method of forecasting price movement. However, it necessitates the use of several tools and elements. Volume and liquidity traders, for example, frequently use various charting tools known as indicators in addition to candlestick charts.

Let us look at the fundamentals of crypto technical analysis in the cryptocurrency market.

Core terms of technical analysis

Price prediction is not rocket science, and it is quite simple. Traders who use technical analysis usually use charts and past price action to figure out market trends with the help of different indicators and metrics.

Candlesticks analysis

While we briefly discussed technical analysis, it is now time to walk you through one of the most common technical analyses, candlestick analysis, which is my favorite one.

The information about daily price movement is displayed visually on a candlestick chart by candlesticks, a financial technical analysis tool. It illustrates patterns in the price movement of derivatives, securities, and cryptocurrencies. In technical analysis, traders use candlesticks to predict potential price movement based on historical patterns. So, we can say that candlesticks are extremely helpful since they provide four price points (open, close, high, and low) over the specified period.

Having said that, candlesticks have two parts: the body and the wicks

  • The body might be red or green. The green candlesticks show that a coin closed above its opening price, and the red candlesticks indicate that the crypto coin closed below its initial price. 
  • The candlestick’s wick represents the price range: the top wick’s peak represents the highest price, while the bottom wick’s tip depicts the lowest transaction price.

Candlesticks provide a thorough insight into how traders buy and sell cryptocurrency during a specific duration. When the user picks a period for trade analysis, each candlestick indicates the activity in that period. 

Therefore, if a trader works for six hours, each candlestick represents the price change every six hours. That is why traders choose candlestick charts because of their ability to provide more precise information regarding price movement.

Pivot point trading

Have you ever struggled as a cryptocurrency trader with where to start your trading day and where to base your trading decisions? 

Understanding the pivot point (PP) will make things easier for you.

Professional cryptocurrency traders use pivot points to identify potential support and resistance levels. Simply put, a pivot point and its associated support/resistance price level are areas where the direction of price movement may change.

What makes pivot points so appealing?

This is due to the fact that they are OBJECTIVE.

Unlike some of the other indicators discussed above, no discretion is involved.

Regarding pivot points’ history, floor traders were the first to use pivot points to forecast support and resistance price levels in the equity and commodities markets. So, we can be confident in the pivot point’s accuracy and consistency.

PP can also aid in determining overall market trends, as prices that break upward past a certain area can be considered bullish, while prices that pass below the same region can be considered bearish.

Before you become terrified by the formula, I’d like to clarify that you don’t need to remember it. There are indicators available that will calculate the pivot point for you automatically. However, the formula below will assist you in developing a logic for calculating pivot points.

The “five-point system” is the most commonly used method for calculating a pivot point. This is an average of the previous trading period’s numerical high, low, and close to plot a course for five levels: two sets of supports, two sets of resistance levels, and a “pivot point.”

  • Pivot Point P = (Previous High + Previous Low + Previous Close)/3
  • Support S1 = (Pivot Point x 2) – Previous High
  • Support S2 = Pivot Point – (Previous High – Previous Low)
  • Resistance R1 = (Pivot Point x 2) – Previous Low
  • Resistance R2 = Pivot Point + (Previous High – Previous Low)

Cryptocurrency pivot points are similar to Fibonacci levels in many ways, as there are so many people interested in those levels they almost become self-fulfilling.

Fibonacci trading

Alt-text: Leonardo Fibonacci

Retracement and extension are two of the many Fibonacci studies that exist, but we’ll focus on just those two here. 

To kick things off, let me formally introduce you to Mr. Fib himself. Leonardo, the man who discovered the Fibonacci sequence, Fibonacci Leonardo was a well-known Italian mathematician, and he discovered the Fibonacci retracement. Let us go over it in depth.

Fibonacci retracements are also one of the most widely used technical analysis tools, and crypto traders use them to forecast potential financial market prices. When used correctly, Fibonacci retracements and ratios can assist traders in identifying upcoming support and resistance levels based on past price action.

Fibonacci lines, by the way, are a tool for confirmation; therefore, they work best when combined with other technical analysis tools like moving average convergence divergence (MACD), trend lines, moving averages, and volume. Generally, the more confirmatory indicators there are, the stronger the trade signal will likely be.

Why are Fibonacci retracements used by traders?

The cryptocurrency market rarely trades in a straight line and frequently experiences temporary dips called “pullbacks” or “retracements.” Therefore, digital asset traders use Fibonacci retracements to determine how far a market will deviate from its current trend.

Technical analysts draw six lines on an asset’s price chart to calculate its Fibonacci retracement levels. The initial three lines are drawn at the highest point (100%), the lowest point (0%), and the average (50%). The remaining three lines are drawn at significant percentages in the Fibonacci sequence: 61.8 %, 38.2 %, and 23.6 %.

As per the golden ratio, these lines should indicate the points at which support and resistance levels are met. As a result, traders can enter a buy or sell position below or above the support and resistance levels. Alternatively, these can assist you in determining your entry and exit prices, simplifying your trading decisions.

Bollinger bands (BB)

Bollinger Bands (BB) are a type of tool that falls under the category of lagging indicators. But it’s also a very interesting, simple, and dependable indicator. The BB indicator comprises two lateral bands that circle a moving average line. It is used to see if the market is overbought or oversold and to measure its volatility.

Bollinger Bands are a technical indicator that consists of three lines that form a channel that contains the price action. The line in the middle is a simple moving average (SMA), and the upper and lower lines are derived from it and move in response to price volatility. Traders use Bollinger Bands to determine the current trend, measure volatility, and forecast potential trend reversals. 

To summarize, investors look for a sell trade when a crypto coin hits the upper band, and when a coin hits the lower band, they look for a buy trade. Finally, the wider the BB band, the more violative the crypto coin.

Simple moving averages (SMA) 

One of the most prominent types of technical indicators is the moving average. Moving averages are a simple method of eliminating short-term price swings and highlighting longer-term market trends.

The simple moving average is among the most widely used and well-known technical analysis indicators. SMA is calculated by adding a series of prices and dividing the total by the number of data points.

If the most recent three prices are 1, 2, and 3, then the average is the sum of the prices (1+2+3) divided by the number of reporting periods. The total of the prices is six, and the number of reporting periods is three, so six divided by three equals two.

The SMA is called a “moving average” because it is plotted on the chart alongside each bar, forming a line that “moves” with the chart as the average price changes.

When a new price becomes available, the average “moves” to always be based on a similar number of reporting periods. Applying a Simple Moving Average helps to reduce the noise of fluctuating prices so that the overall trend direction can be determined.

Using Telegram channels for technical analysis

Several cryptocurrency experts and experienced investors use social media platforms to form crypto groups to help other investors understand the market conditions and trade accordingly. You can join these channels for free or as a paid service, with the latter offering additional features or higher levels of crypto signals. Furthermore, these crypto telegram channels try to provide precise trade recommendations based on market conditions and technical analysis. 

Although there are several social media platforms for receiving trading signals, Telegram is the most efficient. A Telegram crypto signal channel has several advantages, one of which is that it allows for direct communication between the admin panel and the expert. 

Another advantage of using crypto signals on Telegram for technical analysis is that you can save significant time and effort by conducting less research. For instance, traders can conduct transactions without visiting a cryptocurrency exchange by sending crypto signal calls via customized bots. You can use the indicators to help you decide what to buy and how to invest and earn. However, it is impossible to forecast your earnings. 

The crypto space’s signal Telegram channels are constantly in doubt because they vary so much in the short and long term. One issue with these channels is that the signals are occasionally delayed, particularly regarding trend movements that reveal an already-established trend. 

Cornix has a one-size-fits-all solution. 

Whether you are a trader or a signal provider, the trader receives a user-friendly platform with robust automation, customization features, and integrated signals. At the same time, a signal provider can easily integrate and manage their Telegram channel without fear of their trading signals being leaked.

Technical analysis for beginners: which currency to start from?

When used correctly, technical analysis can increase your trading profitability. Traders use technical analysis to forecast an asset’s future direction by examining previous prices and market data. Therefore, professional traders constantly look for confirmation signs from their preferred indicators before entering a position. 

Charts are the best tool for visualizing historical prices and identifying patterns that, if repeated, may indicate how prices will move. Technical indicators such as SMA, RSI, Candlesticks, and Bollinger Bands are used by traders to build technical trading strategies, and charts are used to analyze market values. 

As a beginner, it is usually preferable to begin using technical analysis with a cryptocurrency with a long history because technical analysis is based on a coin’s historical pricing. Bitcoin (BTC) and Ethereum (ETH) are the cryptocurrencies with the longest price history in the cryptocurrency market. It is best, to begin with Ethereum or Bitcoin technical analysis as they have more data and can be analyzed with more technical tools. 

Technological advances allow many brokers and websites to provide electronic trading platforms that mimic real-world marketplaces. Furthermore, several websites offer comprehensive summaries of technical analysis ideas, which may be an excellent place to start for new traders. 

Start trading with Cornix

If you want to gain a competitive advantage in today’s market, Cornix is a viable option that could provide you with a significant advantage. Cornix helps traders make smarter decisions by connecting them to experienced signal providers. So, if you want to excel in crypto trading, Cornix can help you learn faster and make technical analysis easier. 

Moreover, Cornix bots are powerful and easy to employ. One of the most important ways to access and control your account is through the widely used messaging service application, Telegram. 

Your exchange account will be automatically stocked with trades from the bot once you’ve connected Cornix to a channel or TradingView scripts you find useful. Use our range of cutting-edge trading tools to maximize your earnings, such as simultaneous stop and take-profit orders, trailing stop orders, and multiple entries.

Join Cornix and start your journey to trading the most valuable assets in the world!

Is it easy to use? 

Since one of the ways to connect to the Cornix bot is via Telegram, it makes it extremely intuitive to use. You can find inspiration anywhere and immediately put your best ideas into action. Investors value Cornix because it facilitates trading without the need for human intervention.

Cornix offers a number of ways to streamline processes thanks to its automated functions and single-click interface. Additionally, a manual-follow mode is included. Cornix also has unique features like trading signals, news feeds, and portfolio management tools. 

  • Orders for take-profit and stop-loss on the same balance
  • Divide your take profit and entry targets in half.
  • Setting up automatic entry and take-profit strategies, default trade size, stop-loss, and more.

These tools are designed to help traders make better decisions in their trades by providing them with the latest insights from the markets and their portfolios.

Enabling auto-trading on your Cornix account

Put our mobile apps, web services, and bots to work for you wherever you are. To begin the registration procedure from the website, click the “Register” button on our log-in page. The second way is to initiate a chat with the bot directly by visiting t.me/cornix trading bot and clicking the “Start” button at the bottom.

Check out a dedicated guide for more information on the bot’s registration process.