Technical analysis (TA) is a method of evaluating possible future price action based on historical data. It involves the use of indicators, charts and timeframes to determine opportunistic entry and exit points for a given trade or investment.
The most widely used types of charts include:
- Candlestick charts, which show an asset’s opening, closing, highest and lowest price over a given timeframe.
- Line charts, which show an asset’s price history as one easy-to-understand line.
For any given cryptocurrency, there are several supply metrics to consider, such as circulating supply, total supply and maximum supply.
Market cap is a metric which measures the monetary value or size of a public company or cryptocurrency. It can help you assess the risk and growth potential of an individual company or cryptocurrency.
The relationship between supply, market cap and price is commonly misunderstood. The price of a cryptocurrency means very little on its own. Multiplying price by circulating supply—that is, calculating the market cap—provides much greater context for assessing a cryptocurrency’s risk and growth potential.
Volume is the monetary value of trades which have taken place over a given period such as 24 hours. Typically, the higher the volume, the greater the liquidity.
Charting patterns are recognisable shapes or formations that can be identified when observing historic prices of a cryptocurrency or financial instrument. Examples include pennants and ascending triangles. These patterns usually signal the continuation or reversal of a trend.
Technical Indicators are mathematical and statistical tools which serve as another lens to analyse trends, display price averages and measure volatility, among other things. Examples include moving average (MA), relative strength index (RSI), moving average convergence divergence (MACD), and Bollinger Bands (BB).