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The elements of technical analysis (Part 2)

 

                                                                                                          Japanese candles
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This graphical analysis was invented by Japanese rice trader Homma Munehisoy in the XVII century and is now one of the most overall methods of displaying any market data. Watch for the usual price graph is not very convenient, so for building “Japanese candles”, the time is shared into periods. This partition does a visual overall picture that assists in judging about the trend and changes.

Red and green rectangles are painted depends on if an opening price is below of a closing price of the stage, or vice versa.

The max and min price is shown in the form of a vertical line. Via shadows, like a wick of a candle, figures got its name. Regarding the relative length of wicks, you can predict the trend on the next stage. A long upper section of the wick (as compared to the bottom) may specify an onward enlargement, and a longer lower half – the drop of a rate.

                                                                                               Figures of candlestick analysis

Japanese candles are multipurpose. They could be applied by as proficient and entering traders. Samples of candlestick parsing of figures:

                                                                                               Three advancing white soldiers

This form represents by itself 3 successively ascensive white candles, the closing worth of each subsequent is upper than the antecedents one. This shape reaffirms the bullish tune, so it can be said about the start or the prolongation of the upward movement. If after the formation of 2 white candles on their fond, the third seems small – there is the probability of the formation on the market a short correction. Long positions should be confined to the time and insensibly close previously opened.

                                                                                                                  Cover

A cover – is an another form of the up and down trend continuation. Slight truce comes after

building a long white candle . At this time, 3-4 corrections of candles are formed, they have no descending motion. When after them a white growing candle appears, it is necessary to unblock a long position on a max of the white candle, with which the building of the model is started.

                                                                                                             Indicators

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Technical indicators in trading are called a graphical demonstration outcome of mathematical counting applying a definite formula, defined on the ground of past worth modifications or another source of market data. The schedule of the indicator is applied to forecast ensuing worth modifications.

Most of the elementary strategies grounded on technical parsing, linked with the Moving average pointer. It produces a mathematical average of prices taken for a determined period. During changing of the rate, the signification rises or falls, that permits to set the overall trend of motion of a cryptocurrency instrument hereafter and to get earning by elementary estimation.
Precepts of the moving average’s using are quite elementary: if the worth is above the motive average- the price is augmenting, if below – crashing. For a more rigorous prognostication can be taken 2 motive averages with divers stages. There, where 2 lines will intersect, you should reckon for a trend reversal.

Notwithstanding its demonstrable plainness, it is very pop in virtue of its long-term prognostication.

Indicators – the most pop and researched modes of technical analysis. It is grounded on mathematics, and not on hazy argumentation, and it gives clear answers to “physicists”. And for doubt “lyrics”, indicators assist in making a decision for a reason, according to “science”.

The profitability of the indicators is discussed no less ardently than the utility of technical analysis. On cryptocurrency exchanges, they are applied same as everyone else – in combination with the perpetual quest for the unimprovable parameters. The classic indicators can be applied during cryptocurrency trading – MA, MACD, RSI, Stochastic, Momentum, ZigZag, etc., as well as more peculiar, designed for other markets.

MACD

There are some tips :
• It is characteristically for Bitcoin “fading” commerce for a long time with the drop off volumes, and

• then an abrupt spurt. The classic indicators do not have time to counteract to such bounces.
• To diminish the action of volatility should be avoided applying of indicators at low stages for intra-day trading you should not take periods less than 4H.
• Trading capacity reveal regular and sudden changes, sometimes committed by one deal. If you solve to apply the indicators on the ground of volume, they require very fine-tuning leaned on real statistics.
• On some exchanges, ungrounded “candles”periodically emerge in the magnitude of tens of percents. Among the massive exchanges, BTC-e is especially famed for this. The pointers typically do not reply to such tricks.

объемы торгов

 

 Trading volumes

The capacity of commerce – the aggregated number of units of traded cryptocurrency, which transmitted from hand to hand on the ground of fulfilled orders. It is very substantial the pointer of capacity, which arose when the price has obtained some level. It could be a sign to start to commerce in anticipation of further price motion in the needful route.

In various platforms, the presentation of a vertical and horizontal volume is applied. The widest incidence on exchanges got the vertical volume.

Vertical volume

It creates a list with information about the amount of all transactions concluded for a certain stage of time and is displayed in the form of columns under a price schedule in relation to time. Time interval built for one column is the same as in the price graph. That is, if you apply the hourly schedule, the volume appears in the form of columns, each of which refers to the total volume of commerce over the past hour. For the daily chart, it is calculated for the entire trading day.
TA_volume1

The most practical way to apply the volume may be the specification of the end of the corrective motion as part of the trend. A greatly increased volume when the price that is going against the primary trend could signal the end. This point is beneficial to start to deal in the direction of the trend.

This technical analysis can be seen at the BTC-E Exchange page. Like the “candlestick”, it is also intermediate. The data are plotted in the form of columns, the height of which corresponds to the commerce volume during the period. Large volumes may “undermine” price fluctuations and small, on the contrary, to narrow.

TA_volume2

It is possible to identify common regularities:

• If the volume increases with a further motion of a price in a given route, the market will support this movement.
• If the volume of transactions falls on further price motion in this direction, the market will not support this motion.
• Changing of the commerce caparcity can be as an early signal of a modification in the trend. In the case of falling prices and reducing trading volumes could be expected a start of falling and vice versa.

However, it should be noted that the presence of a large volume of commerce on cryptocurrency can not always point to a further strong price motion. The main impetus for changes in quotations is aggressive (or large) orders, and you can not only determine the amount of the bearish or bullish tunes. The cooperative analysis of quotes and volume will help in this.

                                                   Results

 

As a general rule, the scattered by the specific and focus groups of players manage courses and can at one moment increase the trading volumes. Yet, many participants have successfully used a short list of elements of technical analysis to guess price movements. It uses only the basic tools and simple approaches that are easier to interpret.

 

News trading strategies are effective, but to find adequate cryptocurrency news and in time – can be difficult. One of the best news sources are the thematic forums and blogs, in which players often spread their views and comments further developments. In media news about cryptocurrency  appear after a long delay, which negates their relevance.

 

Note that restricted groups of participants create the main part of the movement on a cryptocurrency exchange, which trade by large volumes and are able to spend a significant course correction. And considering a small capitalization of basic cryptocurrency, a trader even with a relatively small deposit (in comparison with the stock market) can significantly affect the exchange rate. Speaking in advance of their intentions, such groups or individual players are unlikely to be, we can only keep pace with time to detect the beginning of the event and place the appropriate order.

 

All warnings and notes about the volatility, which are valid for the Bitcoin trading, should be “multiplied” several times for altcoins. Even tiny in comparison with the stock exchanges  Bitcoin’s capitalization is measured in billions of dollars, while for the majority of forkers instances it is a matter of millions, and for less popular – miserable tens of thousands . Therefore, an enterprising trader or a group, even with little capital can rotate for any fork Pump & Dump operation (rise and fall), to sell their coins at the peak to those who hopes to earn on a further rise. And it can never happen again.

 

In any case, before you place an order on a stock exchange, it is necessary to conduct a thorough technical and fundamental analysis of the situation, and only when there are two or more confirming signals to enter the market.

 

Good luck in trading!