How to Analyze Cryptocurrency to Invest Profitably

If you have decided to earn some funds from investing in cryptocurrency, you shall know how to analyze cryptocurrency market. There are some basics that are just a must for everybody who wants to start. If you have learned them, you can move on with more detailed analysis and, as a result, with an opportunity to invest more and to earn more.

Here, we will check the following:

  • What main trends are dominant in the market and what they mean;
  • The most accurate charts and how to understand them;
  • The basic terms used in the market, what they mean and how to read them correctly.

Here, you will also find out how to combine different types of information to get as much as it is possible.

How to Analyze Cryptocurrency Trends to Make Informed Decisions

First, we will start with the very basics. If you want to understand how to analyze cryptocurrency, learn about trends. When it comes to cryptocurrency trading, we distinguish three main trends:

  • An uptrend or bullish trend: the price of your cryptocurrency is moving up;
  • A sideways trend when the price doesn’t change;
  • A downtrend or it is named bearish trend: the price is moving downwards.

The price of any cryptocurrency never moves in one direction constantly. There is a specific limit to which it might fall. This limit value is called resistance. When the movement reaches a specified resistance level, it might stop. After that, it might continue falling or might start moving upwards.

There is a specific limit to which the trend might move up, too. This limit is called support. When the movement gets to a support level, again, it might stop and either will continue moving up or will start falling.

When a trend is strong enough, the price might even move through a resistance or support level without even a short stop.

It is important to know how to analyze cryptocurrency trends to forecast correctly the price movement of your coin. Then, you will know when to make an investment into the coin and when it is better to sell. Only then, you can hope for some gains.

How to Analyze Cryptocurrency Charts for Correct Investment

If you understand charts, you can consider yourself a more experienced trader with cryptocurrencies. The basics, we call them fundamentals of trading are over. Now, it is time to move to the next stage. So, how to analyze cryptocurrency charts?

First of all, let us check the main charts that you can use. There are plenty of graphs, and it is normal if you don’t know all of them. But if you know the basics, you can be sure that you will be able to find out what any chart means.

Open-High-Low-Close or (OHLC) Chart: Its Structure and Meaning

The charts of this type consist of bars, they are called candles. They differ one from another based on the situation in the market. You can use either individual candles or their groups to determine what the market trend is.

A green candle shows a bullish trend, while a red candle is an indicator of a bearish trend. Each candlestick has particular elements:

  • The top price during a particular trading session;
  • The closing price at which a particular trading session was closed;
  • The opening price, at which a trading session was opened;
  • The lowest value during a trading session.

This amazing model was invented in the 18th century and has been used until now successfully to analyze the movement trends of any asset.

Candlestick chart is frequently combined with trend lines. This combination allows eliminating the errors that a candlestick chart alone can have. These tools help to determine the current trends, they are especially important for long-term trends, more accurately. That’s why if you want to know how to analyze cryptocurrency trends, you cannot miss trend lines.

A Moving Average

It is one of the simplest ways to track a trend. You select a specific period and monitor the prices for your cryptocurrency during this period. When you check the data for shorter periods and compare them with the data for longer periods, you can forecast what the trend will be, whether it is going to continue or not.

How to Analyze Cryptocurrency Market to Earn with Crypto

Technical analysis is one of the main ways to analyze the situation in the cryptocurrency market. However, if you want to know how to analyze cryptocurrency and make really accurate forecasts, you need to know how to analyze cryptocurrency market as a system. It is now enough to rely on technical analysis only.

There are many other factors that can change the entire market, especially if we speak about the cryptocurrency market. If you want to know how to analyze cryptocurrency data, make sure you know everything or as much as possible about:

  • Finance regulation: if a big economy forbids cryptocurrency, the price of a coin will drop, hence, consider it before investing more money in it;
  • Hacking attacks, especially those on big exchanges, influence the prices negatively;
  • New product releases will boost the prices of related coins;
  • New agreements signed will influence a coin in a very positive way, and similar.

If you want to consider all, to learn how to analyze cryptocurrency trends really well, make sure you follow all such events closely. For that, read the white papers or all new products, constantly check the latest events, consider the general moods in the market that can either support or undermine the trust in cryptocurrency. Add your favorite tool or even some of them, and the most exact forecasts are guaranteed.

And always remember: the cryptocurrency market is one of the most volatile markets ever. Be ready not only for big profits, but for big losses, too, and never invest more than you can really afford to lose.  

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