Scams exist everywhere, and the world of cryptocurrency trading is no exception. But there are some things you can look for to keep yourself from falling for fake crypto scams.
What To Look For
- Pay attention to the URL. Is there a lock sign? If not, it’s best to move on.
- Track the creators. Who are they? There should be information about them on the Internet and social media. If the creators are anonymous, that’s a sign something may be going on that could cost you money.
- Check the website. Is it professional with links to the creators and the whitepaper? The website should contain enough information you can investigate and verify validity.
- Is there a whitepaper? Every legitimate crypo project publishes a whitepaper explaining their purpose, the technologies they’re using and the platform. Any cryptocurrency without a published whitepaper is a red flag.
- Are they promising extraordinary returns in a short amount of time? Crypto trading is volatile with extreme ups and downs, and there are no guarantees. Scam artists go after newbies who think they beat the system and get rich quick.
Once you’ve verified the crypto you’re interested in is legitimate, it’s time to analyze the coin for profitability.
Technical analysis refers to the practice of identifying trading opportunities by analyzing charts, historical price patterns, and trends.
While technical analysis (TA) can be practiced on everything from stocks and commodities to cryptocurrencies, this article will break down how technical analysis may help you navigate crypto markets, analyze price charts, and potentially be more strategic when buying and selling digital assets.
A quick intro to technical analysis
To determine an asset’s value, fundamental analysts look at macroeconomic and microeconomic trends, industry conditions, and the competitive landscape.
Traders and analysts use technical analysis to identify possible trading opportunities. Technical analysts aim to understand market sentiment by looking for patterns and trends and to predict price movements by examining historical data such as price and volume.
Simply put, technical analysis is performed by traders and analysts who evaluate future price movements by looking at historical price movements and market chart data.
Does technical analysis work with Bitcoin trading?
Technical analysis helps traders navigate price volatility and spot market opportunities. Since crypto markets for certain assets like Bitcoin (BTC) may be volatile and partly driven by speculation, technical analysis supplies key indicators of price movements, especially support and resistance zones.
A support zone is a price level where a downtrend may pause or accelerate due to an uptick of buying interest. A resistance zone is a price level where an upswing may pause or accelerate caused by a jump in selling interest.
Breaking down technical analysis for Bitcoin traders
Cryptocurrency technical analysis can be broken down into three basic sentiments:
- History tends to repeat itself
- The market discounts everything
- Prices move in trends
Day traders typically begin by examining common time frames for buying and selling Bitcoin and other cryptocurrencies. This includes studying windows of trading times, such as 15-minute, one-hour, four-hour and daily charts for cryptocurrency trades.
So, what goes into technical analysis for Bitcoin and other cryptocurrencies? Here are four tools and KPIs (key performance indicators) that you should consider:
- Average directional index: A technical analysis indicator that helps determine the strength of a trend. The average direction index is derived from the moving average of price ranges over a set period of time.
- Bollinger Bands: A tool that helps determine whether asset prices are high or low on a relative basis. Bollinger bands serve as a volatility indicator that measures the relative highs or lows of an asset’s price as it relates to previous trades.
- Relative strength index (RSI): An indicator that measures the relative strength, or amount of price movements. RSI indicators analyze whether an asset is overbought or oversold. Overbought assets in theory may be overvalued, while oversold assets may be undervalued.
- Standard deviation: A measure of market volatility based on how far prices are from their average. This measure goes up when pricing is more volatile and goes down when pricing is calmer.
Relying on technical analysis when you’re trading Bitcoin and other cryptocurrencies can help take emotion and other less level-headed factors out of the equation. While it’s important to note that technical analysis will never be able to guarantee positive results, it may give certain traders peace of mind that they’re headed on the right trading track.
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