Technical analysis
Technical analysis is something without which it is impossible to predict the movement of prices. The analysis is made on the basis of understanding the psychology of the market and monitoring the behavior of the price of a particular cryptocurrency.
What should one remember about TA?
1.
All factors affecting the price are already included into the schedule;
2.
Price always moves in the trend;
3.
History repeats itself.
Therefore TA is most important on cryptocurrency markets, rather than other tools. The market itself is still very young, so that you can use only one fundamental analysis and very volatile, because at the moment its capitalization is negligible compared to other markets. In addition, there are a large number of newcomers, which primarily use technical analysis.
As the practice of many successful traders, such as The Wolf of Poloniex, Bob Vulgaris or Whale Panda, is, the basics of TA are much more effective than complex elements, as almost everyone uses them, and the basics of TA behave like self-fulfilling prophecies.
Here's a small tip - all ingenious is simple and everything is simple genius!What can be attributed to the basics of TA?
1.
Trend lines: support and resistance levels;
2.
Using RSI, SMA;
3.
Patterns (graphic: figures: flags, double bottom/top, head and shoulders, wedge, pennant, candlestick patterns)
Having disassembled these simple TA tools, you can feel like a superman in the cryptocurrency market.
Let's take a closer look at them:
Trend lines:
Trend is our everything. All technical analysis, its basis (Dow theory), all this is based on a key understanding of the fact that the price always, in one way or another, moves in the trends. And there is no easier way to define them than simple trend lines.
How to build a trend line?
The line is constructed very simply. One minimum or maximum value is taken and connected to the other, after which the line extends further. Voila - our trend line is ready.
To build it, you need at least two maximum or minimum values. Remember! For a trend up the line is drawn down; for the trend down - up.
The main function of trend lines is to work as support and resistance. 
As long as the price is above the trend line, with its growth and under the trend line, when it falls, the trend is considered strong and stable. In the same place, you can expect a rebound in prices from these inclined levels. When the price crossed the line - then the trend is complete.
How to determine the movement of prices on the trend line?- Assess the strength of the support / resistance lines. To do this, it is enough to see how many times the price of each line was knocked. If we see 7 rebounds from the resistance level and only 3 rebounds from the support level, then most likely, the price will go down.
- Additionally use indicators such as RSI
- Analyze the movement of prices on different timeframes. The error will be analysis only in a small time interval. So you will not see the movement of the price entirely.
- Work off the lines. The main problems of newcomers is that they are not able to spend at least a month working on the development of such lines or other tools of TA.
Using the RSI indicator
RSI is an indicator that has one line and serves to determine the strength of the current trend, as well as possible points of its turn. RSI compares the absolute value of price growth for a certain period of time with the level of its fall for the same period. The result of the calculations is displayed in the form of a curve on the chart with a range of values from 0 to 100%. Standard parameters of RSI: time period -14, overbought zone -70%, oversold zone -30%. Accordingly, if the market is for a long time in the overbought or oversold zone, a turn is likely
Patterns (figures on the charts)
Patterns are stable, repetitive price models, the appearance of which indicates that we have a positive probability that, following the appearance of such a model, the market will continue to move in a pre-determined and well-known direction.
In other words: the patterns can tell us whether the current market trend will continue or it will reverse on the contrary.
Patterns are divided into:
- Figures of chart analysis;
- Candlestick combinations;
- Fractals;
- Statistically significant price patterns.
For a beginner this is too big amount of information, so we'll just look at the basic chart patterns and candlesticks. The rest at the initial stage is simply not necessary, the main thing is not to complicate things!Figures of chart analysis
Figures of the continuation of the trend:
the flag, the pendant are the classic figures of the continuation of the trend. Breakdown of the upper limit is a signal to continue the trend. The formation of a figure should also be supported by the volume of trades typical for it.
Figures of the fracture trend: head and shoulders, double top and double bottom. When a fracture of the trend is formed on the market - this means that we have a high probability that the current trend will change its direction.
Figure head and shoulders:
a strong indicator of trend change, the more it is, the more likely that you have correctly defined the pattern. The usual head and shoulders - a bearish indicator, means a price drop. Inverted H&S predicts further growth. The signal for this figure is the breakdown of its base or the so-called neck line. When this happens, we can expect that with a high degree of probability the current trend will change.
Figure double top/double bottom:
is also quite common and popular figure of the fracture trend. This figure also applies a signal if the price overcomes the line of the base of the figure.
The patterns of candlestick analysis
are combinations of Japanese candles, the appearance of which shows us that the market is very likely to reverse the current trend to the opposite.
Among the basic patterns of candlestick analysis, I would single out:
bullish or bear absorption and the
morning and evening stars.
The figure of absorption is bullish or bearish: They give a powerful signal to reverse the trend. To form these figures, you need three conditions:
1. The body of the first candlestick should be smaller than the body of the second;
2. The body of the second candlestick should cover the body of the previous one (the body of the second candlestick may not overlap the shade of the first candlestick, although this situation is an even stronger signal);
3. The second candlestick should be opposite in color to the first one.
Strong signal - when the candlestick completely covers the price range of the previous day - from the minimum to the maximum, and not just the body of the previous candlestick.
The candlestick combination morning/evening star indicates a high degree of probability of a trend change. The candlestick combination consists of three candlesticks: the first candlestick is a growing/falling candlestick with a long body followed by a candlestick with a short body. The third candlestick is falling/growing and its body covers a significant part of the body of the first candlestick.
It is important to know! Candlestick analysis works best on long-term time intervals, such as: days, weeks, and months. The most optimal period at which candlestick combinations give the most reliable reversal signals are weekly time intervals.I would also like to add that trend lines and patterns are the basis of the basics and it is necessary to understand these points in great detail. I have not covered a lot of subtleties: the location of the contact zones on the line, the angle of inclination, the internal trend lines, the breakdowns; other patterns of trends, etc. All this is a great material for self-study. Regarding candlesticks, I would recommend the book of Gregory Morris - Japanese candles.
Well, at last a couple of tips: -Do not trade too much. People often lose money constantly buying or selling a coin. Patience is the key characteristic of any professional trader.
-Never hurry! The main thing is a clear, deliberate and unhurried analysis. The market will not run away from you.
-The fear of losing everything or the syndrome of lost profit. I described these errors in the previous article. I advise you to read it again.
https://bitcointalk.org/index.php?topic=2850179.msg29236037#msg29236037 -Follow news, use the calendar of important key events. I will write about this later.
