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Technical analysis is a fundamental tool used by traders to understand price movements and predict future trends based on historical data, especially price and volume. If you are a beginner or looking to enhance your knowledge, here is what you should know.
## What is technical analysis?
Technical analysis is based on the idea that **asset prices (such as cryptocurrencies) reflect all available information**, and that price patterns tend to repeat over time. Instead of analyzing profits or technology (like fundamental analysis), this approach focuses on studying charts.
### The main idea:
- **Price reflects everything**: Everything that affects the market – news, rumors, sentiments, or liquidity – shows in price movement.
- **History repeats itself**: Investor behavior often recurs, creating recognizable patterns.
- **Trend is your friend**: Markets do not always move randomly; they follow upward, downward, or sideways trends.
## Basic technical analysis tools
### 1. **Price Patterns**
They are shapes that appear on the chart indicating the possibility of trend continuation or reversal.
- **Continuation patterns**: such as Symmetrical Triangle, Bullish Flag.
- **Reversal patterns**: such as Head and Shoulders, Double Top.
### 2. **Moving Averages**
Helps filter out volatility and identify trends.
- **Simple Moving Average (SMA)**: Average price over a time period.
- **Exponential Moving Average (EMA)**: Gives more weight to recent prices.
Example: If the price of **Bitcoin (BTC)** is above its 200-hour moving average, it may indicate an upward trend.
### 3. **Momentum Indicators**
Shows whether the asset is in a state of overbought or oversold.
- **RSI (Relative Strength Index)**: If above 70, the market may be in overbought territory. If below 30, it may be in oversold territory.
- **MACD**: Used to identify entry and exit points through line crossings.
### 4. **Support and Resistance Levels**
- **Support**: A price level where it is difficult to go lower, due to strong demand.
- **Resistance**: A level where it is difficult to go higher, due to heavy selling.
When breaking these levels, a significant change in direction may occur.
## How to read current data using technical analysis?
Using price data from the past hours, we can spot some indicators:
### **Bitcoin (BTC/USDT)**
- The price rose from $113,975 to $114,830 in the last 4 hours.
- Upward trend with an increase in volume, which may indicate buying flow.
- Still under the nearby resistance at $115,091 (highest price in the period).
## Basic tips for beginner traders
1. **Start with daily or 4-hour charts** – Avoid overtrading on very short time frames.
2. **Use stop-loss** – To protect your capital from sudden fluctuations.
3. **Do not trade with your emotions** – Stick to the plan, and avoid buying at significant highs or selling at steep lows.
4. **Combine several tools** – Do not rely on just one indicator. Combine moving averages, RSI, and patterns.
5. **Follow news with technical analysis** – Sometimes the market moves due to external events (like bank decisions or technical updates).
Technical analysis is not an exact science, but it is a powerful tool when used with discipline. The more you train yourself to read charts and understand market behavior, the greater your chances of making sound decisions.
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