What is Technical Analysis?

What is Technical Analysis?
Technical analysis is a way to analyze the movement of asset prices on financial markets using statistical tools such as charts and mathematical formulas. The purpose of learning technical analysis is so that traders can assess current market conditions based on historical prices in the past, as well as provide an overview or prediction of future market movements.

Previously, traders made calculations that combined charts and mathematical formulas manually, but now technical analysis can be done more easily. Generally, online trading platforms have been equipped with features to display price movements in various types of charts, as well as various technical indicators as analytical tools.


Characteristics of technical analysis:
1. Requires a lot of data to support prediction accuracy.
2. Its reliability depends on the trader's skill in reading charts, applying indicators,
    and practicing analytical techniques.
3. Suitable to be applied to short-term and long-term trading.


Basic Principles of Technical Analysis
The most common technical analysis used by traders to analyze and predict crypto prices is based on three principles:

1. Market Price Discount Everything
Meaning: the price shown on the chart has illustrated all the factors that affect the market.

2. Price Moves in Trend,
This means: prices do not move randomly, but always form a certain pattern (trend) that will continue until there are signs that this movement pattern stops and changes.

3. History Repeats Itself,
Meaning: there is a strong tendency that the behavior of market participants in the present will give the same reaction as market participants in the past, in responding to various information affecting the market; so the motive for the movement that had once happened could be repeated again.


Technical Analysis Component
Technical analysis contains a number of important components. These components must be known by all crypto traders are price chart, technical indicators and

1. Price Chart
Price graph shows the exchange rate of two currencies and continues to move from time to time. There are three price chart models that are commonly used in technical analysis, namely Line Chart, Bar Chart, and Candlestick Chart. Among the three, the most popular one used by crypto traders is the Candlestick chart.

Line Chart only gives one price value, the closing price. While the opening price, high price and low price do not appear in the Line graph. Because the supply of information provided by line charts is very limited, Line Charts are rarely used by day traders and position traders.

There are 4 important components for crypto traders in the Bar Chart, namely high prices, low prices, opening prices and closing prices. The highest point of the vertical line represents the high price and the lowest represents the low price of a certain time frame. The hyphen on the left represents the opening price and the one on the right represents the closing price of a certain time frame.

Candlestick charts are the most widely used charts for cryptocurrency trading, but many crypto traders do not understand what information is provided by candlesticks. A green candlestick meant it's bulish, a red candlestick meant it's bearish.



2. Technical Indicators
So that the price movements shown in the chart above can be analyzed, technical indicators are needed. There are many types of technical indicators, but they all have something in common, which allows traders to interpret current price movements so that they can come up with predictions for future price movements. Because of the many technical indicators in the world, even up to hundreds, each trader can use different indicators. However, there are a number of indicators that are commonly used, including Moving Average (MA) and Relative Strength Index (RSI).


3. Technical Analysis Methods or Techniques
The combination of MA and RSI to prepare trading decisions crypto, is part of the technique or method of technical analysis. So, in technical analysis, just using charts and indicators is not enough. Tradercrypto can make its own techniques or methods of analysis, based on one type of indicator, a combination of many indicators, or combined with special techniques such as Fibonacci, Retracement and Reversal, Elliott Wave, and so forth.


Learning technical analysis means having to understand how to use indicators such as Moving Average and RSI. However, technical analysis and indicators are not 100% certain. Market conditions can change at any time and no one in the world can know what will happen in the future. Therefore, the results of technical analysis and fundamental analysis are "estimates", and traders must always be prepared to face the possibility of wrong prediction.