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Cryptocurrency trading analysis

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Written by   76
6 months ago

Cryptocurrency trading, is like stocks trading. Cryptocurrencies although have a very high fluctuation rate and this is, what makes them more difficult to trade. There are two methods of analysis generally. Fundamental analysis and technical analysis. Both those methods apply to the stock market also, so we can learn about those two methods.

Fundamental analysis

In the stock market, with fundamental analysis, we check out the economics, of the company, like sales, innovation, capital strength, and other factors, that give us the power of the company, and the strength to fight competition in the long run. With cryptocurrencies, we can see, in a similar way, the importance of the use and the applications of cryptocurrrency and the long term technical innovation and longstanding development team. The way the team reacts to the challenges that come up, and any other factor that comes to mind. With fundamental analysis, a buy and hold, investment is done, because the investor, expects gains from the profits of the company, or the increasing capitalization of cryptocurrencies, as more and more people use them.

Technical analysis

Technical analysis is a methodology for evaluating investments that involve a statistical analysis of market activity. It utilizes price charts and other indicators to identify patterns that help as a basis for investment decisions. In technical analysis there are chart patterns, indicators and oscillators. The principal in technical analysis is that the price already reflects available information so the investor must be focused on the statistical analysis of the price movements. There are three assumptions in technical analysis:

  1. The market discounts everything

  2. Price moves in trends

  3. History tends to repeat itself

To do technical analysis, statistical data is used, to find out trends, and do the appropriate investment actions (buy or sell), to get a profit. There are many different indicators that are used. In this article, we will stay on the most common used, because it will need a book to write them all.

Relative Strength Index (RSI)

The RSI is based on a 14 day time limit usually although this can be altered. The RSI is measured on a scale of 0-100 with overbought assets between 70-100 and oversold assets between 0-30. The RSI is calculated by calculating the momentum of the ratio of higher closes to lower closes - so the more the stock moves up - the more positive the RSI. When it is in the oversold area, it's time to buy, and when in overbought it is time to sell.

Moving average and exponential moving average

The moving average is calculated on the last n prices. Moving average 10, is the average of the last ten days, prices, or moving average 30 is the last 30 days prices and so on. When the prices cut the moving average line, from bottom to top, then it is a buy signal, and when it cuts, from top to bottom, it's a sell signal. To minimize risk and transactions, two moving average lines can be used, instead of prices. When the 10 day average cuts the 30 day average from bottom to top, it is a buy signal, and the inverse, is a sell signal.

Most of the stock analysis tools, can be used for cryptocurrency trading. A trader needs time and patience, to make profitable transactions. There is no way to eliminate loss transactions, from a trader's transaction history. Trade with care.

Image from Pixabay


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Written by   76
6 months ago
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Comments

Another great article as expected. Keep writing! I would love to read more of it

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6 months ago

Always you try to bring uncommon article. That's so good. Keep it up dear.

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6 months ago