Technical analysis – the powerful tool in Bitcoin trading – introduction

Technical analysis – what it exactly is?

Technical analysis is a study of the profitability of investments in given assets (cryptocurrencies, stocks, currencies, commodities, etc.), performed on the basis of charts of price changes, turnover values, order sizes and technical indicators. Technical analysis is supported by numerous technical indicators and statistical analysis tools.

The main goal of technical analysis is to determine the moment of purchase or sale of a given asset that is favourable from the point of view of a given investor, as well as to determine the probable change in the price of this asset in the future, taking into account all factors that had or may have an impact on the supply and demand for a given asset.

Basic principles

Technical analysis assumes that stock exchange phenomena precede economic phenomena, and the market is a mechanism that discounts the future. Technical analysts prefer to analyse the market trend instead of statistical data.

Technical analysis is based on three basic principles:

  • The market discounts everything – the market price includes all available information about a given item, its current micro and macroeconomic situation as well as economic, economic, industry, regional and political conditions.
  • Prices are subject to trends – the price of a given stock is in a specific trend (uptrend, downward, horizontal) and will remain in this trend as long as there are no clear signals indicating a reversal of this trend.
  • History repeats itself – collective behaviour of investors on a given stock or market repeats according to specific patterns, therefore, based on a study of the past, one can make a price forecast in the future.

Insight

This area, often underestimated by financial market theorists, is based on close exploration, which allows to notice the repetition of certain price movements and enables an accurate forecast of future prices. It focuses on the actual choices of market participants, in which they buy and sell based on price trends, predictable behaviour, and the dynamics of relationships between markets over time.

Technical analysis is an extremely useful set of objective tools for interpreting the behaviour of market participants, which is reflected in the chart and very widely used in practice. It allows, for example, to increase profit by avoiding improper transactions and teaches thinking taking into account the theory of probability. Technical analysis assumes that stock exchange phenomena precede economic phenomena, and the market is a mechanism that discounts the future. Technical analysts prefer to analyse the market trend instead of statistical data.

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