Trading Cryptocurrencies. Does Technical Analysis Work For Cryptocurrencies? My Take On Trading Cryptos -

Please cook sure to read my foreword before legal proceeding and also understand the ladened clause before establishing an opinion about this article.

This article is my personal opinion and it's not intended to be seen as any type of investment advice. IT is purely for amusement purposes. Trading any financial market is inherently risky and you have to make a point to understand the risk before making whatever decisions. (full risk disavowal)

First appearance

My destination with the article is it to divvy up my personal view, things that I have learned roughly the crypto market after following it for over 12 months, issues I catch with other traders who contact lens ME and I also want to provide my opinion on different aspects about the cryptocurrency food market.

We bequeath take a step past step take the crypto Mary Leontyne Pric action, explore the new marketplace, the players, talk about trading vs. investing, price discovery and more. If you are looking for specific corrupt or sell recommendations, this article is not for you. But if you neediness to get a different view without the plug and drama, chances are that you will enjoy this piece 😉

Crypto markets are new

Ut! You probably didn't need me to tell you this, but let's start at the beginning. And yes, although a bitcoin chart will escort backwards to 2013, when it comes to mainstream attention, the crypto market is still a baby compared to other established financial markets.

The implications of this fact are manifold as we will see not long. But what it basically means is that we are all exploring uncharted terrain and everyone is computation out every bit we are going. The players in this market are new, many without any anterior experience in fiscal markets. Regulators are trying to make up their minds, governments are dealing with the unknown and even the technical aspect is nonindustrial happening the fly. I am not saying that this is bad (or good) but I am just now stating the obvious so that we can set back the groundwork.

I find IT very fascinating to witness the creation and the development of a unprecedented market right in front of our eyes. No one knows what will happen close month or next year with this new market and where this is going, but pursuit it from an interest-driven perspective is fascinating to me. Information technology also unveils a good deal about how humans tick from a greed and fear perspective, how we are hard-wired and you can even learn a good deal nearly yourself overly. This is a precise valuable lesson for anyone, regardless of whether you see yourself every bit a trader or just a "normal" someone.

The players in the crypto market

Ahead we take a aspect at price charts and technical analytic thinking, let's assure why the crypto market is so unique.

From what I am sighted, information technology seems that the composition of the hoi polloi World Health Organization are up to his neck in trading the crypto market is unequalled.

First of all, many people are relatively tech-savvy because buying, storing and the technical root of the crypto securities industry is often not as straight-forward as it is with other markets where you can retributory ring up your bank and have them buy any ship's company blood line for you Beaver State you open a factor chronicle and buy/sell assets with just one click. The average Joe hasn't gotten into the crypto market as much up to now, although the mainstream media is pushing more than and more hoi polloi into it.

The players in the crypto market keister be (very) broadly speaking categorized. What they have in common though is their appetite for malodourous division.

One radical of people World Health Organization are interested in cryptos are on a lower floor the mediocre age of the typical investor in let's say stocks or futures. The reasons for the demographic difference could be referable the tech side of things and that the newer generations are more open to new technologies. Even so, As other agent research has confirmed in the past, there could be another factor arse the unique composition of the crypto market:

"Poor, young men who live in urban areas and belong to specific minority groups invest more in stocks with drawing-type features. Investors with a large differential between their existing economic conditions and their aspiration levels hold riskier stocks in their portfolios." (1)

Another Major grouping is made up of hedge funds, major (investiture) banks and other big financial players. Those have a large appetite for variance and are betting, just like the starting time group, connected a possibly vast repay by being early adopters. However, this bit group usually understands the risk related to with it much better and is more diversified. Plus, they have done their homework and know what they are getting into.

Finding your average investor surgery plunger is not A common yet. Entry barriers, price fluctuations anunderstandingunderstaning for this space are the main drivers. This singular composition of high-variance players is creating a single position of commercial enterprise actors.

The market is ever changing

Because there are always new players coming into the market and many of the exchanges cannot even keep up with the flood of registrations, it also means that the composition of market participants is always changing.

What this does is that the dynamics of the markets are always changing arsenic well. The more people with little to no prior trading experience are entering the market, the inferior predictable the price discovery could become. Volatility spikes can increase and the rally vs. sell-unsatisfactory dynamic (which we will cover later o) changes all the time as well. Dips could potentially target the inexperienced participants and try to shake them dead. Fakeouts and shakeouts are ordinarily known in other financial markets and they could also manifest in the crypto securities industry.

Just a legal brief look at Bitcoin and Ethereum below with the ATR indicator (Medium Avowedly Range – an indicator that measures cost fluctuations) show how the price changing has changed. The rise in the blue ATR shows clearly how the price fluctiations have accelerated up until the point where the markets have screw-topped for now.

Black swan events

The price discovery is driven by masses who are buying and selling their cryptocurrencies and one conducive component to how people make their buying/selling decisions are the supposed coloured swan events.

What is a black swan event?

The black cast is a term that describes unexpected and unforeseeable events which can cause major price fluctuations.

In the Forex market, the unpegging of the CHF, the BREXIT or the flash-crash were all so-called flash wreck events. Those events can lead to major price movements within seconds where altogether the liquidity is sucked out of the markets and the damage just tumbles for hundreds operating theater tied thousands of points.

Many people reason that black assert events could become more likely in the crypto marketplace as well. Some reasons for such an argument are the maximising likelihood of government interventions and regulations. Add thereto the unique writing of market participants and a knee-jerk sell-remove reaction could easily turn into a rangy price drop. Especially now with the advent of crypto futures and CFDs information technology becomes flat easier to express a unawares position. We have already seen one relative incidence in ETH during June 2017.

I am non a gloom and doom guy simply I am just stating the obvious and something that many euphoria-driven, inexperienced crypto traders do not full understand because they haven't experienced such a black verify outcome in the past or a commercialize cycle for that topic. This becomes especially &gerous if you are trading cryptocurrencies on margin which is a whole several write up.

Cryptocurrencies and technical psychoanalysis

Now let's finally poke into about charts. I have been looking at price charts, in the main Forex, for the past decade and charting is a huge passion of mine. I'd also read that I am comparatively best at determination patterns and understanding toll moves. I take up been also following cryptocurrency price charts for o'er a year now to explore whether IT is worth applying the concepts of technical analysis to those charts surgery stick around to a buy and hold psychological science.

Hera are my observations to this date when it comes to technicals and Leontyne Price action for cryptocurrencies:

Round numbers

Round numbers, particularly on the Bitcoin market seem to be employed quite a well. Round numbers can often have a psychological affect and other commercial enterprise markets oftentimes show similar characteristics.

Of course, they do not work whol the time, like any other tool of technical depth psychology, but it appears that the market participants are paying attention to them. I voluminous contributing factor could be the photograph to financial news where Bitcoin gains popularity nearly every time a big round number is approaching. For unpracticed participants, those round numbers are also easily identifiable.

Breakouts

In front the increase in volatility and when the Bitcoin commercialise in use to be a pure bull grocery, up until reaching the top below 20,000 late 2017, breakouts were the way to go. Horizontal breakout buying seems to have worked identical accurately but since the market has topped and been fluctuating more than, this strategy is not as helpful anymore.

Support and ohmic resistanc

Bitcoin is the largest crypto market with the highest market capitalisation and the price has started to conform to more conventional support and resistance concepts fresh. It is immoderate from organism a clean securities industry simply the fact that the price is gainful more attention to those concepts seems auspicious. It is still not something I would switch actively like I do with Forex, but it sparked my interest more and I am holding an eye connected information technology.

However, this effect seems to be special to Bitcoin mostly for now. Even the second and third largest cryptocurrencies are non at that place yet and their technicals get along not look as accurate Eastern Samoa Bitcoin does. Although you can see that the price does respect some levels some of the time, the accuracy goes down and also the steadier flow we are used to from look at Forex, Futures or stocks charts cannot be compared. And formerly you start going down the list of cryptocurrencies, the effect becomes less and less visible.

Terms dynamics – sell offs vs. rallies

Indefinite of the most important factors of charting cryptocurrencies is that the price seems to undergo other phases:

Greed – Fear – Loss of pastime

Again, I am non saying that this is a truth set in stone, but I am sharing my personal view and the impressions I buzz off from interacting with traders daily and paying close attention to the financial and mainstream media.

Whenever Bitcoin puts in a rally, it leave be prominently conspicuous on various financial media channels. When it dips, the fear mongers surface and predict the following big drop or even the end of crypto permanently. And during periods of oblique movements, people lose the interest for a while. This phenomenon confirms, at to the lowest degree for me, my hypothesis from above that the authorship of the crypto markets is unique and inherently different from other established markets.

Again, A a individual who has been involved in financial markets since I was 15 this is enchanting to watch and it helps you interpret hominid psychology and motives in a unaccustomed stage every bit we will explore now.

Speculation vs. income-generating – the role of the crypto markets

Whenever I get asked by hoi polloi about my take on the whole crypto grocery, I give the same answer.

As a relatively conservative person, when information technology comes to business markets and risk, I do not advise (curt term) speculation into the crypto markets. If you ingest some spare money that you can afford to lose without regrets OR having to change your lifestyle, the crypto markets could be worth a scene. However, you need to understand the risks that accompany it and you have to interpret that you could lose all your money. Make a point to really read the fine print and consult your financial advisor forward.

You essential understand the risks and you must understand how cryptocurrencies and the technology behind information technology. The come of people who have No estimation how financial markets work, what an interchange is, how blockchain kit and boodle and what wallets are, simply are still eager to buy cryptocurrencies is astonishing. Granted, you might not pauperism to cognize all the technicals, but if you invest your hard attained money, you better do your homework.

In this context, I have to also emphasize the importance of well-educated in what you invest. Many people will randomly search the smaller cryptocurrencies just because they hope that they bequeath hit a home pass and 100x their money by next hebdomad.

If you follow such an approach, it is essential that you research in what you empower. Understanding the technology, the coin, the team up and the legalities. This is especially true when investing in small ICOs where many repugnance stories are current through the net. If you do not have a sodding understanding of what you adorn in and if you haven't researched it, you are acquiring willing for a disaster.

What does it say about yourself?

I recall there are many lessons that the current crypto market backside Teach you about yourself.

Are you the kind of guy who doesn't do research and barely buys a unselected crypto because of the name Beaver State because of a random tip? What does this really say about yourself, your workplace ethic and your attitude towards money?

Are you looking through forums operating theater social media channels and hope to get Fed a signal although you have no idea what you are in reality investing in? What does it say about your greed level and your willingness to submit actual work to get to where you want to be?

Truly Lashkar-e-Toiba this sink in in and learn about yourself. It'll glucinium a valuable lesson.

Long vs short-term

What is more, the time purview of your investment funds decision has to be clear in improvement. Do you believe in the general mind behind cryptocurrencies and the blockchain technology? Do you think that it will transubstantiate the world as we know it? Then you should probably take over a longstanding-term view and not worry about the short fluctuations. You are also more in all probability to do the explore, be open to new ideas and non just hope to realise a million dollars by future week.

Many people say that they wish to invest semipermanent merely forthwith enter the day trading mindset where they following their portfolio tick by mark.

Forex vs Crypto

For ME personally, I clearly differentiate between Forex/Futures and the crypto market. Whereas I construe the crypto investment purely as a speculative, all or nothing scenario, my Forex/Futures trading has a very different role. As I stated earlier, I am keeping an eye happening the development of the crypto and the blockchain scene, but from a trading perspective, other established markets such as stocks, Forex surgery Futures derriere offer a more reliable trading get.

Reference:

(1) Kumar: Who Gambles In The Securities market? – Accessed through: econ.Elihu Yale.edu