Technical Analysis and Fundamental Approach in the Crypto Market
In cryptocurrency trading, the combination of technical analysis (TA) and fundamental approaches is one of the most effective methods. Together, they allow traders to make well-informed decisions. If you are familiar with other forecasting methods, integrating them with TA can yield even better results.
What is Trading?
Trading is the process of buying and selling assets (e.g., cryptocurrencies, stocks, or other securities) to earn profits from price fluctuations. There are several trading styles, each suitable for different types of traders:
1. Scalping
Scalping involves making quick trades to profit from small price movements. This approach requires high speed and focus, making it ideal for automated systems and trading bots. Scalping remains one of the most profitable yet risky trading methods.
2. Day Trading
This style involves closing all trades within the same day. Advantages include:
• Lower risk compared to scalping.
• The ability to trade for just a few hours per day.
• Independence from fundamental analysis.
Beginners are recommended to start with day trading as it helps develop discipline, emotional control, and essential skills like setting orders and managing risks.
3. Swing Trading
Swing trading focuses on medium-term trades (from one week to a month). It is perfect for those who are patient and willing to wait for significant market moves. Patience is the key to success here.
4. Position Trading
Long-term trading where positions are held for months while the trend continues. Traders must be prepared for temporary drawdowns and remain calm during profit fluctuations.
5. Arbitrage
A method based on price differences between exchanges. For example, buying cryptocurrency on one platform and selling it at a higher price on another. This style is most effective for large trading volumes.
Why is Risk Management Important?
Risk management is the cornerstone of successful trading. Every trader should have a clear trading algorithm that includes:
• Entry and exit conditions for trades.
• A specific timeframe for analysis.
• Rules for capital management.
Trading without a strategy leads to chaotic decisions, often resulting in losses. Many beginners make the mistake of trading without a structured plan.
Choosing a Trading Platform
Selecting a reliable exchange is crucial for cryptocurrency trading. Recommended platforms include:
• Binance — the largest crypto exchange with a user-friendly interface.
• Bitfinex — popular among professional traders.
• Kraken — renowned for its security features.
• Bittrex and Huobi — offering a wide variety of cryptocurrencies.
For market analysis, TradingView is a highly recommended tool for technical analysis. However, access to its full features requires a subscription.
Trends and Levels in Trading
• Trend — the direction of price movement. There are three types of trends: upward (bullish), downward (bearish), and sideways (flat). Identifying the trend is a fundamental skill for traders.
• Support and Resistance Levels — key zones on the chart where the price either slows down or bounces back. In the crypto market, levels often work with high precision, making them a reliable tool for analysis.
For an upward trend, support levels are drawn through minimum price points, helping traders predict the best moments to enter the market.
For a downward trend (bearish), on the other hand, resistance levels are drawn through the high points:
Trading Systems: Trend-Following Approach
Let’s return to trading systems and examine their key elements. One of the most essential strategies is the trend-following system, which is based on tracking market movements.
Example of a Trend-Following System:
Imagine the market is in an upward trend. In this case, traders use price pullbacks (corrections) as an opportunity to strengthen their position. When the price bounces off a support level, the asset is purchased with the expectation of further market growth. This approach allows traders to efficiently leverage trend movements while minimizing entry risks.
2. Within a Price Range (during a flat market).
In this case, we identify support at the bottom and resistance at the top of the range. Trades are made based on these boundaries: buying near the support level and selling near the resistance level.
3. Breakout Trading
If we anticipate that breaking through a key level will lead to the price moving upward (or downward), we can place a limit order to buy/sell slightly above that level. Once our scenario plays out, we follow the price movement. However, it’s essential to remember the phenomenon of a false breakout, where the price makes a quick move beyond the level but then returns to the previous range and/or starts to decline.
To summarize, today we discussed the following:
• What trading is.
• The types of market analysis.
• Trading styles.
• The concept of a trading algorithm.
• Trends and levels.
• The topic of choosing a trading platform.
