Bitcoin Price Predictions And Forecasting Via Technical Analysis Guide
For anyone dipping into the world of cryptocurrency investment for the first time, it can be a truly daunting prospect. One element that proves ironic in its desire to help newcomer investors is the sheer wealth of tools like charting, or technical analysis indicators, serving to scare off, instead of inspiring newcomers.
The same is true for a number of investment and social news outlets, each of which have their own writers talking about trends and providing a technical analysis of the current market. And while their intentions can sometimes be good, are there any elements that you, as a new investor should look out for in a reliable technical analysis?
The answer is yes, and here they are.
Technical Analysis – The Fundamentals
Technical Analysis can also be referred to as Chart Analysis, that's the first lesson so as to avoid future confusion. It serves as a method of evaluating the price movements of various assets you care to keep a closer eye on.
These can include conventional stocks, assets, bonds, ETFs, commodities and Crypto Assets. Chart/Technical Analysis serves in an attempt to identify price trends and predict future movements in the value which will help color your investment strategy.
Technical Analysis, unlike fundamental analysis, focuses solely on the on the actions of the price instead of the intrinsic value of the price. In contrast, technical analysis involves the use of various technical indicators and analytical tools to gauge where the assets price will go next.
What's more, Chart Analysts believe that any information needed to empirically measure and evaluate an asset is found in its price movements and trading volumes. It's believed that these also serve as better indicators than assets fundamentals (features like use cases, management team, customers or users, market cap etc).
While this would make it appear to be a fait accompli in terms of using technical analysis over other methods of analysis, it's important to understand that it's a divided argument among market professionals as to whether technical analysis is a valid method, and if its predictive powers can be fully reliable.
To put this in perspective, there are highly experienced investors and financial experts that liken the credibility of technical analysis to astrology, while others base their entire investment strategy around its application.
While chart analysis will not accurately predict future price movements on a consistent basis, it can be a valuable tool to find the right entry and exit levels for your trades and to identify price trends.
Technical Analysis – Not All Are Created Equal In Markets Image
If there's one word that's synonymous with the internet it's ‘abundance', and that's certainly the word used to define the availability of technical analysis when you're a new investor online.
The internet is awash with technical analysis for commodities, stocks, bonds, and now crypto assets. And while it's great to see that so many are taking on themselves to provide advice, there is such a thing as too many cooks, or in this case, too many analysts.
Their experience, skill, and perspectives can fluctuate dramatically, making it even more of a challenge. So, as an investor, it's important to know what to look out for in your ideal analysis.
To evaluate the viability of a technical analyst report, you can look at the following three aspects:
One – The Analysts Credentials
It's one of the aspects that we tend to forget about, but that's all the more reason to thoroughly examine the individual that's giving you the analysis, especially when it comes to their credentials. Hypothetically, if the person giving the advice has a long background with financial companies, specifically in technical analysis, then their work may make for some interesting reading, while also providing some insight into the latest price movements.
However, if there's little to be found in the way of credentials for the person in question, or they're merely a blogger looking to take advantage of the feverish demand for cryptocurrency advice, then your guess is as good as our when we tell you to steer clear of any advice they give you.
Two – What Indicators Are Being Used For The Analysis
One of the other points to consider is what types of indicators your specific analyst finds themselves using. This is essential is it makes a significant impact on how valid their findings are and how it may influence their overall thinking in terms of market trends moving forward.
For example, some research has shown that using only one form of technical indicator will not be sufficient in providing an effective analysis of the asset in question, it's a combination of various indicators which allows for the best predictions to be provided. Ideally, this is the analysis that you'd want shaping your investment strategy, as well as finding indicators which compliment each other strongly.
One other factor becomes apparent if an analyst you know is only using one type of indicator, and that's that they may not be as experienced or able to apply the financial knowledge they have effectively enough.
Three – Having A Successful Track Record Of ‘Calling It'
We remember Nostradamus not because of the way he looked, but because we perceived him to be correct about a number of events which happened in and after his life. Well, the same is true of financial analysts.
In selecting someone you deem to be a trustworthy and reliable analyst, it's important to look through their previous technical analysis to assess whether or not they have an effective system of tracking and predicting the market or not.
Put bluntly, check if they've been right in the past, and depending on how accurate they've been, that will serve as writing on the wall for whether you should trust them or not. It proves categorically that they have an effective spread of technical analytical tools in place to predict the movements of the market.
Measuring the credibility of an analyst through these three factors, you can not only benefit from their expertise, you can also side step a remarkable amount of financial misery from backing the wrong analytical horse.
Should You Read Technical Analysis Reports?
It can never really hurt to get the opinions of those that have some more experience or larger amount of credentials in the fields of market and technical analysis. It remains a question that the investor as an individual must answer for themselves.
If nothing else, good technical analysis from skilled analysts with a good reputation can never hurt, on the contrary, they can provide a unique scope of insight, while educating and informing you of the best possible strategy to take in the short, medium and long run of your investment.
In particular, the cryptographic asset markets prove an environment which is well-suited to things like Chart Analysis as they are often defined as ‘inefficient markets'. As a result, it can be difficult to evaluate the fundamental value of assets, while they also run 24/7, which makes chart patterns more obvious to seasoned eyes.
It's important to also take note that people look at, buy and sell particular assets while looking at specific or a select number of technical indicators, depending on how often the market moves in a buy and sell fashion according to these indicators.
As the number of technical analysts and reports for Bitcoin grows, which it (and they) has (have) in the past few months, many could argue that they become an increasingly effective system of predicting market trends.
With that in mind, past performances do not guarantee future success, as one proverb goes, and the same must be taken into consideration when looking through an analysts track record of market predictions. They also provide too limited of a scope to give any conclusive evidence as to the future trending of a market or asset.
All that having been said, technical analysis, when used in a proper way and given by someone who can tick all three of the aforementioned boxes, can be a remarkably useful tool in managing and constructing a strategy around your investments, especially from within the cryptocurrency world.