While bitcoin traders have many tools they can use to evaluate the cryptocurrency market, one of the most tried-and-true methodologies is what’s called technical analysis. Using this approach, traders can get a better sense of market sentiment and identify key trends, and, with this information, make better-informed predictions.
Technicians (sometimes called ‘chartists’) take a practical approach, looking at a security’s history (using price charts) and applying various analytical tools to get a better sense of how the market feels about that particular security.
While ‘fundamental analysis’ – the counterpart to technical analysis – is more interested in determining what a security ‘should’ be worth, technicians are only concerned with a security’s actual price movements. By looking at bitcoin’s price history, technicians attempt to identify well-known patterns such as ‘support’ and ‘resistance’.
Laying the foundation
To get a better understanding of technical analysis, it is important to grasp the basic concepts of Dow theory, which has provided the foundation for this practical method for evaluating securities.
Dow Theory provides a few basic assumptions:
1. The market discounts everything. All past, current and even future information is already factored into existing asset prices. In the case of bitcoin, this
Read more ... source: CoinDesk
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