Types of Cryptomarket Analysis
3 Types of Crypto Market Analysis
To begin, let’s look at three ways on how you would analyze and develop ideas to trade the market.
- Technical Analysis
- Fundamental Analysis
- Sentimental Analysis
You need to have those three types when thinking about the market.
Technical analysts look for similar patterns that have formed in the past and will form trade ideas believing that price could possibly act the same way that it did before.
Technical analysis is the study of historical price action in order to identify patterns and determineprobabilities of the future direction of price.
Technical analysts live, eat, and breathe charts which is why they are often called chartists.
What’s more is that with all the traders who rely on technical analysis out there, these price patterns and indicator signals tend to become self-fulfilling.
You should know though that technical analysis is very subjective.
The important thing is that you understand the concepts under technical analysis so you won?t get lost whenever somebody starts talking about Fibonacci, Bollinger Bands, or pivot points.
Sentiment analysis is used to gauge how other traders feel, whether it?s about the overall crypto market or about a particular cryptocurrency.
The crypto markets do not simply reflect all of the information out there because traders will all just act the same way. Of course, that isn?t how things work.
Each trader?s thoughts and opinions, which are expressed through whatever position they take, helps form the overall sentiment of the market regardless of what information is out there.
As a trader, you have to take all this into consideration. You need to perform sentiment analysis.
Then you have to decide how you want to incorporate your perception of market sentiment into your trading strategy.
Whereas technical analysis involves poring over charts to identify patterns or trends, fundamental analysis involves poring over economic data reports and news headlines.
If you think about it, this makes a whole lot of sense! It is supply and demand that determines price.