If you are interested in trading then understanding the basic fundamentals of a chart is something that must be learned and it requires constant learning. While reading charts, in my opinion, there are quite a few ways to apply proper technical analysis and it’s mostly dependent on the traits of the cryptocurrency and the project behind it. There are plenty of people out there who strictly trade based on FOMO (Fear of Missing Out) and FUD (Fear, Uncertainty, and Doubt) while utilizing some technical analysis but for the most part these individuals are trying to get micro cap coins to make a quick 1,000%. This is exactly what I will not be discussing because it is high risk and requires very large capital and the ability to swap on places like uniswap to manipulate prices. This is also a very difficult if not impossible thing to accomplish without the utilization of a bot to make the extremely quick transactions at the exact right times.
The Basics:
If we strip everything down to the bare minimum of a chart (bar charts) we can see waves of these bars, some red and some green indicating that the specific time frame closed either positive or negative in comparison to the opening price. Now without doing much we can adjust the time frame each bar accounts for such as 5m, 10m, 20m, 1hr, 2hr, and 4hr (my most used timeframes). While studying the chart in these different frames you might be able to notice patterns, and as you move backwards in time you typically notice these patterns are a regular thing. This was my method for trading before I learned more and it did well for me, I never lost a trade but again my methodology is with patients. Eventually I began studying more into the different tools available to have on the charts as well as finally understanding the wicks on the top and bottom of most bars. Essentially if a specific time frame closes with a larger wick on the top the sell pressure was too much for the buyers to handle, whereas the opposite is true for the bottom wicks.
Moving Averages:
This is something that honestly changes from person to person depending on their preference and trading style and also the market cap of the coin in question. Depending on my basic analysis of past events I tend to then add (for most coins) the 10 day, 25 day, 50 day, and 200 day moving averages to my charts. By adding these to your chart it gives you past information to compare against current events, however I still re-review the past of the chart with and without the MA’s to make sure the correlation I see is mostly constant. The MA’s have different effects on the perception of what might possibly happen in the future depending on the different time frames that are being observed. Typically for intraday trading my technical analysis relies mildly on the 1hr and 2hr chart to compare the MA’s while switching between the 1m, 5m, and 15m time frames when I intend to enter or exit a position soon. For my main style of trading I set limit orders based on my technical analysis and the time frame which gives me an idea of how long the specific trade might take to play out. This style of trading takes lots of patients and it tends to work extremely well as long as you don’t mind waiting for some time. However, there are things that can invalidate an analysis which is a bit more complicated and might have to go into more depth on trading in a future article.
Psychology:
While trading in the markets you must remember that it’s like a game of chess with the world that. It takes lots of patients, lots of studying and more than anything, it takes the ability to understand the psychological nature of how people trade the markets. I won’t go too deep into this but, patterns happen for a reason, knowing the patterns along with the incredible amount of variables involved greatly helps to understand not only the charts, but the market as a whole.
Thank you for taking the time to read my article. I hope this has helped give some information and encouraged people to do some more research! Any comments are greatly appreciated!
~Trever Russell
DISCLAIMER:
I am not a professional financial advisor, all information within this article is personal opinion based on my experiences, nothing in this article is meant to serve as financial advice and shall not be construed as financial advice in any form. The sharing of my personal experiences is for entertainment purposes and I nor cryptowriter can be held liable for any information which has been misconstrued and wrongfully utilized as financial advice.
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