Mastering Crypto Technical Analysis: A Step-by-Step Guide


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Crypto market performances are often a trail of past and present market movements. For this reason, experts learn to watch these trails and use the data gathered to their advantage. How? Through technical analysis. Like the forex market, this space also has several indicators that can be used to access market movements and predict what comes next in price action. This is an article detailing what you should know about them and how to utilize these indicators to make the best investment decisions. 

Introducing Crypto Technical Analysis 

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Technical analysis in the crypto market works similarly to other financial markets. It is the gateway to weighing market conditions, past and present performances, and ultimately utilizing the data to make sound market predictions. It is the standard method of getting to know the intricacies of the market — including trends, crypto charts, and an asset’s potential. For investors and participants who trade crypto, technical analysis is how they conduct the necessary research before investing in an asset. The most efficient of these tools are candlestick charts, moving averages, trend lines, and support and resistance levels.

Candlestick Charts

Candlestick charts show price patterns and movements of cryptocurrencies with colors red and green, indicating bullish or bearish momentum. Candlestick charts are highly visual, and they help traders easily note the differences in price changes. The red sticks show a bearish pattern, where the asset has depreciated. On the other hand, the green stick indicates the opposite of this, showing that an asset has appreciated. 

The body of the wicks represents the opening and closing balance of the said cryptocurrency, with the top wick showing how much it rose and to what extent it declined. Candlestick charts are easy for traders to understand and read. When read correctly, they assist traders in seeing patterns in market trends and predicting the following line of action of a crypto asset.

Moving Averages

Moving averages can be used to calculate the average price trend of a cryptocurrency over a given period of days. They shut out short-term fluctuations and read the most recurring movements of assets in the past. With moving averages, traders can easily find out what the average trader is doing in the crypto market and the general performance of an asset without the noise. That is, without the short-term fluctuations and price changes. The everyday moving averages traders use are simple moving averages (SMA) and exponential moving averages. 

Trend Lines

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Trend lines is another visual technical analysis tool popular amongst crypto traders. What this does is show the prevailing prices of crypto assets using lines to display an upward slope, downward slip, or sideways (neutral). Traders use trend lines to spot prevailing price trends of crypto assets. Trend lines can also be used to read the support and resistance levels of cryptocurrencies. The levels touching the direction of the downward lines are seen as the resistance levels. Levels touching the uptrend lines are called support levels. 

Support and Resistance Levels

Support and resistance are concentrated buying or selling levels for crypto assets with difficulty reaching a particular position. The resistance level shows a stage of highly concentrated selling interest amongst investors and a halt in asset price. On the contrary, the support level shows a highly concentrated stage of increased buying, which could lead to an alt amongst other traders and investors. Support and resistance level indicators allow traders to see these indications through trendlines. Both trend lines are drawn in a horizontal pattern, clearly showing where supply meets demand for an asset.

Mastering Technical Analysis for Successful Trades

Technical analysis methods have loads of practical tools traders can use in monitoring the market, and it is mainly advised that a trader works with a healthy combination of these tools. For instance, a good blend of the trend lines and support and resistance levels can be utilized to determine the favorable entry and exit positions of an asset. 

A notable edge of technical analysis tools is that they use quantitative data and give an objective view of trends, history, and performances of crypto assets. Get started with any of the tools listed above, or find a trading platform that offers even more charts and analysis tools that can aid your trading decisions. 

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