The Only Known Cryptocurrency Trading Strategies
When you google cryptocurrency strategies, you’ll see many things which I term as half-truths. Don’t be emotional, don’t be greedy, take profits, etc.All this is true but, it’s good to be looking at the backbone of everything. To be a good trader you have to understand the basics of the two strategies that will be mentioned in this article.
The early bird catches the worm, so the earlier you get this and start practicing it the better. The two cryptocurrency trading strategies are understanding;
- Fundamental analysis
- Technical analysis
Fundamental Analysis
Fundamental analysis is a security analysis technique that relies on careful research and analysis of financial accounting statements, industry and economic fundamentals in order to estimate the intrinsic value of a security.
Fundamental analysts are research-driven following either a bottom-up approach or a top-down approach. A bottom-up approach begins with an analysis of the security-relevant info before incorporating industry and economic data. A top-down approach considers economywide and industry fundamentals before company-specific analysis.
Technical Analysis
Technical analysis is a security analysis technique that studies market trends or patterns and relies on the recognition of patterns that have worked in the past in an attempt to predict future security prices.
Technicians believe that market trends and patterns repeat themselves and are somewhat predictable because human behavior tends to repeat itself and is somewhat predictable.
It claims the ability to forecast the future direction of prices through the study of past market data, primarily price and volume.
In its purest form, the technical analysis considers only the actual price and volume behavior of the market or instrument.
Technical analysts sometimes called “chartists”, may employ models and trading rules based on price and volume transformations.
Technical analysis can be used for any freely traded security in the global market and is used on a wide range of financial instruments, such as equities, bonds, commodity futures, and currency futures
The primary tools used in technical analysis are Charts (line charts, bar charts candlestick charts point, and figure chart) Where charts provide information about past price behavior and provide a basis for inferences about likely future price behavior. and Technical indicators.
Technical Indicators can be classified into Sentiment Indicators: Market Volume (Trin Statistic); Odd-lot Trading; advance/decline ratio and Market Structure: Moving Averages; Breadth; Relative Strength
One factor many have considered in the prediction of prices is trading volume. Volume is a measure of the number of shares that change owners for given securities.
The amount of daily volume on security can fluctuate on any given day depending on: The amount of new information available about the company, Whether options contracts are set to expire soon, Whether the trading day is a full or half-day, and many other possible factors.
Business economists look at anything and everything to get an idea where the economy is headed. Among the best variables are those related to financial markets.
One of these is the stock of “money,” i.e the stock of cash and bank deposits held by firms and households. Other indicators are financial prices and yields, which have the additional advantage of being available immediately.
Other useful financial variables are yield spreads, especially the long-short spread (the difference between yields on long- and short-term government bonds) and the junk bond spread (the difference between yields on high- and low-grade bonds).
The last thing to understand before trading is what we call behavioral finance. Behavioral Finance is the study of the influence of psychology on the financial decision making and it argues that the emotions of investors and mental errors cause asset mispricings.
Behaviorists argue that emotions and sentiment play a crucial role in determining the behavior of investors in the market place and very often they act irrationally due to the influence of psychological factors. Examples are: Overconfidence, Loss aversion, Anchoring/representativeness, Regret, Mental accounting, Probability mistakes, Ambiguity, Herd behavior, and the Bandwagon effect
Technical analysis can be a powerful approach to investments in the cryptocurrency market, particularly when coupled with some fundamental analysis. Hence with the combination of the two strategies be sure to reap a lot in your trade.
