Technical Analysis

Technical analysis originated from the stock market, and later gradually applied it in all trading fields such as futures trading, foreign exchange trading, precious metal trading, and digital currency trading, and established their own systems. Although these systems are different, the core parts are similar.

In stock trading, people first explored the theory of stock investment out of curiosity. Through long-term observation of stock price changes and accumulated experience, they gradually summarized some "laws" related to stock market fluctuations.

After long-term development and evolution, these "laws" have formed many categories, among which Dow Theory and Wave Theory, as well as various technical indicators, such as K-line chart, moving average, MACD, deviation rate , RSI, etc. Moreover, new evaluation indicators are still being produced.

1. Assumptions of technical analysis and matters in use

The fundamental reason why there are so many genres and so many technical indicators is that none of these genres and indicators can be accurately used in any market and in any scenario. In addition, no matter how the indicators and genres are deduced, it is based on the statistical laws given by historical data, and it is assumed that the historical laws will be extended to the future.

But we all know that history often does not repeat itself 100%, and as the global market becomes more and more open, today any investment market is facing interference and influence from various factors, and black swan incidents are endless. Therefore, once explosive news is released, it will completely disrupt the direction of the original technical indicators.

In addition, the drawing and application of technical indicators and various graphics is art rather than science. "Science" means that under the same conditions, only the same result will appear, and it has nothing to do with who or how to calculate it. And "art" means thousands of people, facing the same data, everyone will give different judgments and different analysis.

For example, an investor may draw a different wave chart of the same pattern using the wave theory, as shown in the following image:

In the above figure, some investors will think that this pattern already contains the standard five waves in wave theory , so they have come out of a complete wave pattern; while another part of investors will take these five waves. The small waves are completely ignored, and the entire pattern is regarded as a single main wave , so these five small waves are just episodes and do not represent the complete pattern.

For these reasons, most technical analysts use multiple indicators to make comprehensive judgments.

3. Precautions for using technical analysis in digital currency transactions

The rise of Cryptocurrency trading is not long, so the biggest feature is that the trading volume and total market value can only be considered at an extremely early stage relative to traditional trading markets such as stocks, futures, and foreign exchange. Under such a scale, a slight change in funds can cause violent fluctuations in currency prices.

For traders, it is easy to use relatively small funds to make various beautiful patterns and classic indicators in such a market. Therefore, in addition to looking at technical indicators, investors also need to look at another extremely critical indicator, which is trading volume. An indicator without volume is meaningless.

In the trading volume, the reduced trading volume is more meaningful than the enlarged trading volume. Some market makers can use funds to create the illusion of large trading volume, but small trading volume undoubtedly means that the market is not moving. Large funds are operating.

Most people who make a lot of money through cryptocurrencies buy at the right time, and "technical analysis" can help find a good point to enter the market, and then "hoard coins" through a longer period of time. It may be six months, one year, or two years, depending on the investment target. When studying technical analysis, investors should not hold on to the idea of ​​getting rich overnight, but should learn more and practice more.

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Technical Analysis

Technical analysis originated from the stock market, and later gradually applied it in all trading fields such as futures trading, foreign exchange trading, precious metal trading, and digital currency trading, and established their own systems. Although these systems are different, the core parts are similar.

In stock trading, people first explored the theory of stock investment out of curiosity. Through long-term observation of stock price changes and accumulated experience, they gradually summarized some "laws" related to stock market fluctuations.

After long-term development and evolution, these "laws" have formed many categories, among which Dow Theory and Wave Theory, as well as various technical indicators, such as K-line chart, moving average, MACD, deviation rate , RSI, etc. Moreover, new evaluation indicators are still being produced.

1. Assumptions of technical analysis and matters in use

The fundamental reason why there are so many genres and so many technical indicators is that none of these genres and indicators can be accurately used in any market and in any scenario. In addition, no matter how the indicators and genres are deduced, it is based on the statistical laws given by historical data, and it is assumed that the historical laws will be extended to the future.

But we all know that history often does not repeat itself 100%, and as the global market becomes more and more open, today any investment market is facing interference and influence from various factors, and black swan incidents are endless. Therefore, once explosive news is released, it will completely disrupt the direction of the original technical indicators.

In addition, the drawing and application of technical indicators and various graphics is art rather than science. "Science" means that under the same conditions, only the same result will appear, and it has nothing to do with who or how to calculate it. And "art" means thousands of people, facing the same data, everyone will give different judgments and different analysis.

For example, an investor may draw a different wave chart of the same pattern using the wave theory, as shown in the following image:

In the above figure, some investors will think that this pattern already contains the standard five waves in wave theory , so they have come out of a complete wave pattern; while another part of investors will take these five waves. The small waves are completely ignored, and the entire pattern is regarded as a single main wave , so these five small waves are just episodes and do not represent the complete pattern.

For these reasons, most technical analysts use multiple indicators to make comprehensive judgments.

3. Precautions for using technical analysis in digital currency transactions

The rise of Cryptocurrency trading is not long, so the biggest feature is that the trading volume and total market value can only be considered at an extremely early stage relative to traditional trading markets such as stocks, futures, and foreign exchange. Under such a scale, a slight change in funds can cause violent fluctuations in currency prices.

For traders, it is easy to use relatively small funds to make various beautiful patterns and classic indicators in such a market. Therefore, in addition to looking at technical indicators, investors also need to look at another extremely critical indicator, which is trading volume. An indicator without volume is meaningless.

In the trading volume, the reduced trading volume is more meaningful than the enlarged trading volume. Some market makers can use funds to create the illusion of large trading volume, but small trading volume undoubtedly means that the market is not moving. Large funds are operating.

Most people who make a lot of money through cryptocurrencies buy at the right time, and "technical analysis" can help find a good point to enter the market, and then "hoard coins" through a longer period of time. It may be six months, one year, or two years, depending on the investment target. When studying technical analysis, investors should not hold on to the idea of ​​getting rich overnight, but should learn more and practice more.

Thanks For reading

👥 Support Me & Subscribe/Follow Me 👥

For optimism , Polygon , Eth , BNB , AVAX ( 0x608E4C17B3f891cAca5496f97c63b55AD2240BB5)