What Charts Should Crypto Investors Use?
What Charts Should Crypto Investors Use? – Many people are looking at ways to make money from cryptocurrencies in light of the current boom in the sector.
If a potential investor wants to trade cryptocurrency, technical analysis knowledge is crucial. Understanding and mastering the use of technical analysis is crucial for anyone who wants to trade cryptocurrencies actively or invest in them long-term.
What Is Technical Analysis?
The method of using previous price data to make an effort at predicting the likely future direction of the price is known as technical analysis.
- A technician has access to numerous tools. All come from volume and/or pricing.
- The technician can determine how market participants are feeling by analyzing previous price data that is presented on charts.
- These technical methods can be applied to a wide range of financial instruments, including cryptocurrencies as well as equities, indices, commodities, and other tradable securities.
A Brief History of Technical Analysis
Technical analysis is credited to Charles Dow (1851–1902), who is regarded as its founder. He served as The Wall Street Journal’s founding editor. Dow, Jones, and Co. was established in 1882 as a Wall Street financial news agency by Dow and Edward Davis Jones.
The Customer’s Afternoon Letter, a two-page overview of the day’s financial news, was publishing the following year.
The Dow Jones Index, which was making up of 11 stocks—nine railroad shares and two non-rail companies—was including in the newsletter.
The Wall Street Journal was establishing in 1889 after the partners deciding to turn their magazine into a full-fledging financial newspaper.
Since that time, it has been publishing continuously.
The first editor was Charles Dow.
- His readers were informing about the stock mark.
- He frequently wrote on his observations of stock price swings in this column.
- These observations served as the basis for the Dow Theory, which later became the basis for technical analysis as we know it today.
Principles of Dow Theory
Dow Theory is based on the following tenets:
Asset prices include all available information.
- The values of assets reflect the market’s incorporation of all available information.
- All relevant information about an asset, including its potential for profit and competitive advantage, is already factoring into the asset’s pricing.
Three primary kinds of market trends
- The two main market tendencies are bull and bear markets. Corrections in bull markets and rallies in bear markets are examples of secondary market trends, which typically run counter to the primary ones.
The primary trends have three phases
- There are three main phases for the main trends.
- This encompasses the stages of accumulation, widespread participation, and excess for the bull market.
- On the other hand, the bear market goes through the stages of distribution, public engagement, and panic.
- Market indices must correlate with each other For a new market trend to be validating, signals from one market index must agree with signals from another.
- A new market trend has not started if one market index is indicating a new primary downtrend while another is indicating a new primary upswing.
- But traders can be certain that a new market trend has started if both indices indicate the same rising or negative trend.
Market trends should correlate with corresponding volumes
- The market volume should rise in line with a bull market.
- The market volume should gradually decline during a bear market.
- In a bull market, a decline in market volume could indicate a bearish trend that could eventually result in a bear market.
The trend persists until a clear reversal occurs
- Market tendencies continue until a clear reversal takes place.
- The Dow Theory emphasizes that a market trend will last until a clear reversal occurs. Regardless of variations in the daily price movements.
Also Read: Ethereum vs. Bitcoin
