The effects of technical analysis on cryptocurrency trade: How BTC is influenced by diagram patterns
Cryptocurrencies, especially Bitcoin (BTC), were at the top of the digital currency revolution. Since its foundation in 2009, BTC has undergone numerous price fluctuations due to market moods, economic indicators and technical analyzes. This article will deal with how the technical analysis influences the trade with Bitcoin and examines how different diagram patterns can affect the price of the cryptocurrency.
What is technical analysis?
Technical analysis (TA) refers to the investigation of historical data and diagrams to predict future price movements on the financial markets, including cryptocurrencies such as BTC. TA includes the analysis of various factors such as price trends, relative strength index (RSI), moving average values and other technical indicators in order to identify potential trading opportunities.
How does the technical analysis affect Bitcoin’s price?
The technical analysis has a significant impact on trading with Bitcoin for several reasons:
- Market feeling : The tone of the market mood plays a crucial role in determining the price movement of BTC. A positive mood (e.g. optimistic investors, bullish news) can increase prices, while a negative mood (e.g. bear news, pressure pressure) can lead to declines.
- Diagram pattern : Different diagram patterns have different properties that can influence the price of Bitcoin. For example:
* Trends : Reviews of established trends are often preferred by investors, which leads to increased purchase pressure and higher prices.
* Bullish Engulfing : When a camp forms a bullish candlestick pattern with lower heights, this points to a potential reversal.
* Bearish Engulfing : Similarly, bear wear patterns can signal a downward trend.
- Indicators : The use of different technical indicators can also influence the price movement of BTC:
* Relative strength index (RSI) : An increasing RSI can indicate overbought conditions, which leads to potential sales.
* Moving Average values (MA)
: Short -term MAS are usually more volatile and more sensitive to market changes, while long -term MAS are less susceptible to price fluctuations.
- Market cycles : The price of BTC is influenced by wider market cycles:
* Trend reversations : BTC often experiences trend reversions, with the outbreak or continuation of a downward trend leading to increased purchase pressure and higher prices.
Key diagram pattern that influence the price of Bitcoin
It is known that several diagram patterns affect Bitcoin’s price:
- Bullish Engulfing
: A bullish absorber pattern is characterized by:
* A larger candlestick that is high above the high of the previous day.
* The wick (candlestick body) of the winding candle is longer than its body, which indicates a strong impulse.
- Bearish Engulfing : Conversely, the bear’s reduction patterns belong:
* A smaller candlestick with a shorter wick that ends under the deep of the previous day.
* The wick (candle body) of the winding candle is shorter than its body, which indicates a strong downhill impulse.
- Head and shoulders education : This diagram pattern shows a potential reversal:
* A large head forms on the top of the inverse triangle.
* A small shoulder forms on the bottom of the same inverse triangle.
- Gap Fill : If a gap between two price levels is closed, it can show a strong purchase or sales pressure.
Diploma
Technical analysis plays a crucial role in determining the price movement of Bitcoin, with various diagram patterns influence their trajectory. By understanding these patterns and the use of technical indicators, investors can increase their chances of successful trade in the cryptocurrency market.