Technical Analysis of Bitcoins and Cryptocurrencies
In Dubai’s cryptocurrency market, various tools are used by traders to assess the financial value of a specific cryptocurrency at a specific time. By doing technical analysis, crypto traders can isolate important trends and understand the market in a better way. The data obtained from this analysis can help the traders to make sensible moves after making educated predictions.
Technical analysis is based on Dow Theory. It explores the history of a cryptocurrency with trading volumes and price charts. Price movements are not just random; rather they follow a pattern or trend. Technical analysis helps to predict those trends.
Trend lines depict the general direction of a coin. Crypto traders can isolate these trends to benefit from them. By observing a crypto price movement chart, traders can watch the formation of a linear pattern due to the high and low values present in the chart. Although cryptocurrencies are volatile, traders can find a downward or upward trend by seeing a series of lows or highs respectively.
Moreover, the trends also move sideways. In that case, a crypto coin does not move much in any direction. Traders should keep in mind that there are different forms of trends.
Resistance and Support Levels
Resistance and support levels are depicted by horizontal lines. The present condition of supply and demand of a coin can be known by seeing the values of these levels. There is a large demand at a support level and many traders want to buy the crypto coin at that time. The reason is that the price is low at that specific moment.
However, more buyers means that the price can stop declining and in some cases it can even start increasing. On the other hand, in a level of resistance, merchants wait to sell crypto coins. Usually cryptocurrency trading can occur between resistance and support levels.
Trading volume is used to identify trends. Low trading volume is due to weak trends, and high trading volume is due to strong trends. It is recommended to check the volume when a coin’s value decreases. Low volume of declines and high volume of increases show a long-term trend of positive growth.
Moving averages is another technical analysis tool to identify trends. The average price of a crypto coin over some specific period of time defines the moving average. For instance, a coin’s price for the last 25 trading days can be used to calculate the moving average of a specified day. A line is formed by connecting all moving averages.
Bitcoin trading and surviving in the cryptocurrency market is not an easy task. You need to do a technical analysis to discover trends and predict the future value of a crypto coin.