Ordinary people use cryptocurrency graphs only to view current quotes. But the information on them can give an extensive field for analyzing the current situation. A significant part of investors uses it to get an idea of the market and make a forecast for the future. This technology is called "technical analysis", it is very widely used in stock trading.
How technical analysis works
If a person after work went to the store on Monday, Tuesday, Wednesday, then there is a high probability that he will also peep at it on Thursday. The power of habit makes you predict future behavior.
If you look at the cryptocurrency price graph, you can see similar reactions. After the occurrence of some events, the reaction of quotations is absolutely predictable. It seems that the schedule is not an animate being, and must obey completely different laws. The situation becomes clearer if we recall the reasons for the movement of quotations. Behind each of them is a change in market sentiment. Which directly depends on each of the thousands of investors.
Therefore, the study of patterns allows us to give an accurate forecast of quotations. Moreover, this technology has already been tested on traditional financial assets - currency pairs, stocks, and indices. Modern trading cryptocurrency graph platform allows you to consider the following methods:
The problem with cryptocurrencies is that some of them have a very small history. It is very problematic to collect data on patterns for a couple of years. In this case, the general laws of technical analysis are applied.
Methods for studying graphs
Since the cryptocurrency market capitalization graph is at a very early stage, its liquidity leaves much to be desired. As a result, the trader has to introduce additional analysis techniques.
It is noticed that most digital coins are moving in one direction. The range of oscillations can vary significantly, but in general the trends of the “new” and “old” coins are approximately the same. Therefore, the total cryptocurrency market cap graph can be a great way to study the market.
There are a few more ways to predict prices that traders often use. They allow you to find out the general mood of investors, and not only cryptocurrency buyers. To do this, study the graphs of the following assets:
The volume of liquidity in the market is limited, which means investors are forced to choose between them. They buy the trading instrument that promises higher returns. And if the price of gold rises, then Bitcoin or Ethereum funds get less. That is why the cryptocurrency correlation graph becomes another useful analysis tool.
With all the advantages of graphs, experienced investors do not recommend limiting the methods of price forecasting. In some situations, technical analysis signals are useless. This happens during tectonic movements in the market, or when new legislation is adopted.
In order to properly study cryptocurrency graphs, the analysis must be comprehensive. That is, it is necessary to consider all the factors influencing the price. Therefore, when conducting a purchase or sale should be eliminated in a hurry. Only in this case, the investment will be profitable and safe.