Posted: 05.07.2021 | 06:10
7 Rules to Consider in Technical Analysis
Technical analysis aims to predict future market movement by observing indicators, volume data and price movements to determine actions. To predict possible future trends; It is necessary to examine data such as price levels, trading volume on a chart. Technical analysis is widely used when trading in cryptocurrency markets. Technical analysis can lead to losses if not used correctly. We have compiled our list of 7 rules that should be considered in technical analysis in order to correctly interpret the crypto money markets and determine the right transaction price.
1. Drawing of Price Models
The first of our list of 7 rules to be considered in technical analysis will be to pay attention to the drawing of price models. In technical analysis, the interpretation of price action is unique to the analyst. It is normal for two investors to interpret the same price movement differently and reach different results.
One trader may observe a bearish dip, while another may consider it to be a possible upside reversal signal.
While drawing the price models that you will use while determining the investment strategy on the chart, the following should be considered:
Simply setting price levels can cause you to miss opportunities.Create support and resistance zones. Identify and analyze the ups and downs.
Be careful not to use price levels, which are unimportant in determining the direction of the price, in your analysis. Consider signals formed in strong support and resistance zones. Identify the clues given by the candlesticks. Long candle wicks signify volatility and uncertainty. The up or down direction of the wicks shows the bullish and bearish effect, respectively.
2. Clarify Which Pattern You Are Trading On
In technical analysis, there are a number of patterns that are indicative of market behavior.
It is important to know which formation you are analyzing. Patterns have multiple features, so before you can be sure whether they are successful or not, it is necessary to use the pattern correctly on the chart and know its features well. To learn more about Patterns, you can read our articles on The Most Common Candlestick Patterns in Technical Analysis and Classic Chart Patterns.
3. Know Which Indicators and Indicators
You Are Using Indicators and indicators are statistical tools within the scope of technical analysis that give buy or sell signals to investors. They only provide successful returns when used in conjunction with other technical analysis tools.
There are a number of indicators such as the Relative Strength Index (RSI), Moving Average Convergence (MACD), Bollinger Bands (BOLL) that help traders make trading decisions. It is necessary to know how these indicators are used and to use more than one indicator together during the analysis.
Coinpara has more than 90 indicators and indicators. To learn more about common indicators and indicators, What are the Main Indicators and Indicators Used in Technical Analysis? Why is it used? You can read our articles.
4. Avoid Retrospective Mistakes
Fundamental data, charts, and indicators can paint a different picture of the current scenario, with confusing results. In this case, investors may be inclined to evaluate the possible price direction based on past results. Past results may not always be the same as the future price scenario. In this case, the expectation that past market movements will occur again can cause great losses.
The fourth important rule of technical analysis is to stick to the analysis of the conditions of the period in which you invest, and not to bias with historical data.
5. Plan Your Trading Transactions
Before entering the market you will trade, it is necessary to wait for the buy signals and determine the correct purchase price and date.
Plan your buying and selling transactions in advance, in accordance with your analysis period, on the graph of the crypto money that you think is suitable for you to trade.
6. Adapt to Flawed Market Actions
In crypto markets, the price is determined by supply and demand and is dynamic. Imperfect price actions that don't fit your analysis and rules are common. If these actions take place, it is necessary to reevaluate the analysis. Persisting in analysis despite changing circumstances can result in huge losses.
You have to get used to the idea of imperfection and consider volatility and natural movements.
7.Learning Technical Analysis Is Optional
The last of our list of 7 rules to be considered in technical analysis will be that learning technical analysis depends on the person's will. There are many technical analysis patterns and indicators today, but it is not possible to master all patterns and indicators. You can start your technical analysis by including the most commonly used indicators and indicators. Using too many indicators will create confusion and cause you to make the wrong decision.
You should do technical analysis by using a few indicators and formations that you are comfortable with, and you should have detailed information about these indicators.