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This is the process of forecasting price movements of cryptocurrencies based on the analysis of past data, such as charts, trading volumes, and historical patterns. It is widely used by traders to make buy or sell decisions based on the assumption that all information is already reflected in the price.
Key principles:
The market takes everything into account:
All available news and factors affecting the price are already reflected in the rate.
Prices move in trends:
Prices follow certain trends (upward, downward, sideways) that can be identified and used.
History repeats itself:
Market psychology leads to the repetition of certain price patterns.
Technical analysis tools:
Charts:
Line, candlestick, bar – visualization of price change dynamics.
Indicators:
Technical indicators, such as moving averages, RSI, MACD, which help identify trends and signals.
Figures:
Formative price figures (e.g., head and shoulders, double bottom) that can indicate future price movements.
Trading volume:
signals of technical analysis, as well as identifying the dynamics of supply and demand.
Application in cryptocurrency trading:
Trend identification:
Trend analysis (upward, downward) allows traders to determine the direction of price movement and potential entry and exit points from a trade.
Identifying support and resistance levels:
These levels indicate boundaries where the price typically bounces back, helping to determine potential points for making a trade.
Pattern identification:
Analysis of price patterns (e.g., head and shoulders) helps predict future price movements.
Using indicators:
Technical indicators help traders make decisions about buying or selling, for example, confirming trends or identifying overbought or oversold signals.
Important: Technical analysis is not a guarantee of success and should be used in conjunction with other analysis methods and an understanding of risks.