- Market Efficiency: Technical analysis assumes that all information is reflected in the current cryptocurrency price.
- Price Trends: Traders capitalize on price trends using tools like moving averages to inform strategies.
- History Repeats: Historical patterns and market reactions are often echoed, guiding future trading decisions.
Technical analysis is now considered an essential aspect of trading in cryptocurrencies. This approach of looking at the market is based on three core axioms that traders apply when trying to forecast future price patterns. These principles may not be perfect but they are helpful in making sense of market forces in the unpredictable big data sphere of cryptocurrencies.
In the meantime, the specific area of technical analysis as an essential component of the cryptocurrency trading process developed rapidly since the emergence of Bitcoin. Since the introduction of the market, investors have applied conventional aspects of financial analysis to the new commodity that is digital currencies. These techniques are used to find patterns and trends, in an ever-volatile market environment that is active at any time of day.
The All-Knowing Market: Discounting Everything
The first attribute of technical analysis affirms that the market reflects everything. This principle postulates that the price of an asset, in this case, a cryptocurrency includes all factors within the fundamental analysis, market sentiment analysis, or other external conditions. According to this assertion, those traders holding this view think that it is possible to have an outlook on the market sentiment while predicting price movements by scrutinizing price charts.
Riding the Wave: The Power of Trends
The second assumption is that prices tend to move up in trends and downtrends. This concept is common in most strategies of technical analysis applied in the crypto market. Like any other form of technical analysis, price fluctuations can be identified and utilized by traders using moving averages and trend lines. The concept of trending prices lies at the heart of trends trading and momentum at trading and other prevalent trading techniques in the context of cryptocurrency markets.
Echoes of the Past: The Repetition of History
The third assumption of technical analysis is that an event once occurs will occur again. This principle is founded on the assumption that buyers and sellers more or less respond similarly in similar situations at different times. In the cryptocurrency trading process, the assumption is made while using the chart patterns and technical indicators that embodied certain price movements in the past.
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