Technical Analysis

In this article, we are going to describe two noticeable factors of technical analysis in crypto trading.

TECHNICAL ANALYSIS

There are many technical analysis tools available to aid you in your trading journey to be a successful trader.

Technical analysis allows people to make informed predictions regarding the future of a market based on the market’s history.

Several different types of technical analysis can be used to aid your trades.

People think that technical analysis mostly involves the observing of patterns within charts, but the term encompasses much more.

Market Cap:

Market-Capitalization-formula

One of the most basic things you can do which involves technical analysis is to look at the market cap of the coins and tokens you are interested in. The market cap is the price of an asset X the number of assets in existence.

The larger the market cap, the more effort it will take for the asset to climb in price. This is a greater factor to check than simply the price of a coin. For example, newcomers often think that Ripple has a lot of room for growth because its price is $0.40 (as of July 13, 2018), but the market cap is $17,291,808,853, which is enormous. This means that price fluctuations in Ripple are slower than that of coins and tokens with lower market caps. Traders like to find low market cap coins due to this.

The market cap basically reveals the rarity of the coins. This is why some developers choose to regularly ‘burn’ their coins as a means of improving the price.

Ask/Bid Spread:

bid/ask spread

Another technical analysis method is to check the ‘Ask/Bid Spread.’ this tool will give you an indication as to whether you are participating in a buyer’s market or a seller’s market. If it’s a Buyer’s market that means that most people are interested in buying a particular asset. It is a basic sign of a bull market. In bull markets, people want to buy into products because the price is about to climb or even explode. Anticipation for a bull market can lead to a buyer’s market. Seller’s markets are the opposite. If people are trying to sell as fast as they can, it means they either expect there to be a bear market, or one is already happening. Investors are no longer faithful that their cryptocurrency will be worth holding for a short period.

If you can see more buy orders, you are in a buyer’s market. If you can see more sell orders, you are in a seller’s market.

There are other and more advanced, techniques relating to technical analysis, we will explain them later.