This is part two of “Crypto Markets - Improving Trading Beyond Technical Analysis.” Part one can be found here and Part two can be found here.
What are the issues with using TA?
I wholeheartedly believe that technical analysis can work if one applies it methodically, rigorously, and with limited emotional interference, which is difficult to do. TA is not perfect - predicting the future is impossible - however, technical analysis exists as a practical method that weighs past prices and that asset’s trading volume.
When considering entering a trade, I would not recommend that the trade is made solely based on technical analysis. I think that TA and Trend lines should supplement your trading strategy. TA will allow you to decide at what price point to enter a cryptocurrency, HOWEVER, this should only be asked after answering WHY you have decided entering the trade.
TA will arm a trader with the data to make educated guesses, however, receiving mixed indicators/signals is very common, and this is when you will need to look for even more indicators to solidify your decision. Many traders actually end up using too many indicators, which will lead to a higher chance of having mixed signals and make it difficult to determine a market direction. There is a delicate balance here.
At times, the cryptocurrency market seems to be unpredictable and unreasonable. Crypto market participants must remember that it is a very nascent market and there is a continuous influx of small and big money. Thinly traded cryptocurrencies, coupled with minimal regulation, make it very easy to manipulate the market. Although technical analysis can predict price action based on historical data, it cannot predict a human’s motivations and actions. If a whale (large capital from a wealthy person or organization) decides to move the market, no indicator or candlestick pattern will be able to give you a heads up. Unfortunately, that is the risk in these markets.
As with any market, there are many other factors driving price action. Not only are there fundamental factors that have a significant impact on the cryptocurrency market (e.g. regulations, ETF certificates, mining hash, etc.), but we often see significant impacts from sentiment changes in the market (e.g. positive/negative news about new partnerships, increased use, FOMO, FUD, etc.).
I believe an integral part of fundamental analysis in today’s markets is determining sentiment through big data. Gleaning trends and sentiment from the many social channels used in society gives valuable insight into potential money flows. My recommendation is to blend technical analysis and fundamental analysis to make sensible investment decisions. Positive fundamentals and the use of technical analysis to determine a good entry point will absolutely increase your trading profits.
So. Many. Cryptocurrencies.
Blockchain technology is a complete game-changer, and history has shown that investing in disruptive technologies at the very early stages can be extremely profitable. Armed with basic TA and being able to properly interpret other fundamentals a trader can outperform the market. However, there are so many cryptocurrencies.
As of 02-September-2017, there are 1,096 different cryptos that are traded in 5,416 markets. With the surge of Initial Coin Offerings (ICOs) in the past 6 months, the number of traded cryptocurrencies will keep rising.
This increase in the number of available cryptocurrencies has allowed for an unprecedented opportunity for traders, but it also makes it makes a trader’s job increasingly more complex to identify and monitor exceptional investment vehicles. Cryptocurrency market participants are overwhelmed by a very large and growing amount of data that needs to be digested and interpreted before making a buy or sell decision.
With the bloom of newly available cryptocurrencies, traders are spending more time than ever trying to find suitable investment opportunities among the sea of choices. Even with a well-designed investment approach, the sheer quantity of information and available options to watch makes this job nearly impossible to do alone.
As this market develops, more complicated TA tools will be needed in order to continue to outperform. When tracking multiple cryptocurrencies and multiple indicators on each pair, it will be become very difficult to catch the most valuable opportunities in their early stages.
TA, numerous Cryptos, news - How to successfully trade it!
Thousands of alt-coins price movements across multiple exchanges is just the initial torrent of data users must ingest to effectively trade cryptocurrencies. The most experienced traders rely on a host of services to help them derive insights from the slew of market indicators popping up constantly.
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Token Sale details
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Start Date: 18-August-2017
End Date: 17-September-2017
Cap: $4.2MM denominated in ETH/BTC
Tokens: “ITT”, ERC-20, Ethereum Blockchain
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Learn more today and join the conversation:
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