technical analysis

Technical analysis is a method of analyzing financial markets, including crypto asset markets, that is mainly based on studying historical prices and transaction volumes. The goal of technical analysis is to forecast future price changes of assets by identifying patterns and trends on price charts. It is an approach based on the assumption that price history can provide information about future price movements.

Basic assumptions of technical analysis:

1. Market prices reflect all available information.

2. Prices move in trends that can be identified and used to predict future price movements.

3. Price history repeats itself, meaning that past price patterns may repeat in the future.

Tools of technical analysis:

1. Price charts – the basic tool of technical analysis, on which investors observe and analyze the price movements of assets.

2. Technical indicators – mathematical formulas used to analyze prices, volume, or trends, helping investors make investment decisions.

3. Price patterns – characteristic patterns on price charts, such as head and shoulders formations or triangles, which can indicate potential price changes.

Critics of technical analysis:

Despite its popularity, technical analysis is not without critics. Some investors believe that it is based on unconfirmed assumptions and does not predict market behavior with precision. Furthermore, there is a risk of making interpretive errors when analyzing price charts. Therefore, many investors choose to also use other methods of market analysis, such as fundamental analysis.

However, it is worth remembering that technical analysis remains an important tool in an investor’s arsenal, allowing for quick reactions to changes in asset prices and potential profits from trading in the crypto asset market.