Everytime you trade cryptocurrencies, you have to keep in mind several important considerations. First of all, do you know what technical analysis means? Is that method crucial for a better understanding of cryptocurrency trading? What’s the difference between technical analysis (TA) and fundamental analysis (FA)?
In this article, we will answer all these questions, and discover together what’s the most important aspect of technical analysis.
What is technical analysis?
Technical analysis is a strategy that uses past-price information about a specific asset in order to foresee the future performance of said asset.
Is technical analysis crucial in cryptocurrency trading?
Experts’ opinions vary a lot. According to some analysts, there’s no better way to know how to trade crypto assets. Others are more cautious, as they affirm that technical analysis can not be applied to cryptocurrencies at all. Who is right? It depends. We can agree that such practice can be extremely effective when trading crypto assets. On the other hand, it should not be the only thing to take into chttps://lyopay.com/servicesonsideration, especially as there are certain indicators which TA cannot predict very well. For example, TA cannot predict unusual situations such as massive price movements produced by market alarming news.
Does technical analysis have any flaws?
TA is a very powerful method, but it can also have some minor flaws.
Sometimes, technical analysis risks to be subjective
An analysis is at risk of being subjective when a technician, while trying to identify patterns in the price of a digital asset, sees a certain pattern that others are not likely to see.
It can lead to data mining bias
Sometimes, a technical analyst will select one indicator over another, if that indicator confirms their view of where the market is going. No matter if that indicator is contradicted by all the other technical indicators.
Technical analysis is often compared to another method of study, called technical analysis.
What is fundamental analysis?
Fundamental analysis (FA) measures a security’s intrinsic value by examining all the economic and financial factors that could affect it. Fundamental analysts study macroeconomic factors (for instance, the state of the economy) and microeconomic factors, like the efficiency of the company’s management.