How would you define Technical Analysis in the Crypto ecosystem? Mention its Importance.

Analysis generally refers to the process of evaluating data in order to come up with a pattern, hypothesis, or conclusion. In the crypto ecosystem, it is not so different. Technical analysis is the careful evaluation of data by means- mostly using a computer- to predict the movement of prices. Technical analysis mostly deals with the pictorial representation of data and information in the form of charts which can be used to get details about any security at any point in time. Another form of analysis that seems to differ from the technical analysis is fundamental analysis. Fundamental analysis deals with the use of human psychology, company records, and news to predict the price movement of assets.

Technical analysis has so many use and for that reason, its importance cannot be overemphasized. Some of the importance are:

• Helping traders to make informed decisions: the crypto market can be a very confusing place for people who don’t have the right tools to help them navigate without many problems. The use of technical analysis helps the trader to know precisely when to buy or sell in order to minimize loss and maximize profit.

• Technical analysis helps traders avoid traps: there are some people who make profits from manipulating the market and in turn cause losses to other people. Charting in technical analysis helps the trader to spot obvious cases of market manipulation, therefore avoiding unnecessary losses.

• Technical analysis can be used to analyze data no matter how old it may be. As long as the charts exist, predictions can be made for the future.

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Do you have practical knowledge of how to conduct technical analysis? Highlight some of the

components of Technical analysis.

I have experimented a little with technical analysis- nothing serious. I am not really into trading crypto; I buy and keep. Although buying crypto randomly requires a trivial knowledge of technical analysis, I still try as much as possible to make very calculated decisions. As we all know, the market is controlled by human beings, and we can be very unpredictable.

Some of the components of technical analysis are Price and volumes, charts, and technical analysis.

Price and volumes: as people buy and sell, all the data is recorded. This means that the price at which any asset is bought is recorded accordingly, and the number of transactions that occur are recorded at regular intervals in order to know when more or less traffic occurs.

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Charts: recording trading information can be difficult, especially when many trades are happening at the same time, that is where the chart comes in. Charts are used to represent data linearly or pictorially in a way that makes it easy for the analyst to comprehend. The charts may be candlesticks, bar charts, pie charts… etc.

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Technical analysis: simply analyzing data mathematically for easy assessment. Technical analysis makes use of information from charts to give more reliable guidelines to traders.

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What do you understand by technical indicators? Do you consider them effective for trading cryptocurrency? Which one is your favorite and how does it work? (Screenshots required where necessary)

Technical indicators are software tools that are used to perform technical analysis before getting involved actively in the crypto market. They guide the trader to make predictions with high level of accuracy. Some of the technical indicators are candlestick chart, support and resistance, trend lines, moving average, Relative Strength Index, and bollinger bands. I consider all of them very effective, some more than others.

Out of all the technical indicators, my favorite is the candlestick chart and it is for a good reason.

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The candlestick chart was invented by a Japanese rice trader known as Munehisa Homma in the 18th century, and since then it has continued to grow in popularity.

How it works. It basically has four main parts which are HIGH, LOW, OPEN AND CLOSE.

High in the candlestick represents the highest price an asset reached within a particular trading period. Once the day comes to an end, a new stick forms.

Low represents the lowest price a security go to during a particular time interval, it helps the trader to know how much pressure there was from the sellers.

Open represents the starting price of a new candlestick. From the point which it opens, only the high or low can increase or decrease.

Close represents the closing price of an asset, it helps the trader to understand the possibility of a reduction in price.

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Highlight the advantages and disadvantages of technical analysis. What's your advice to anyone about it?

Advantages of technical analysis

a) I believe that technical analysis helps traders to make fairly accurate decisions in the crypto market and it reduces losses drastically.

b) Technical analysis is useful because it can be applied to every financial scenario- not just crypto market.

c) Technical analysis is nice because it is used in many industries and for that reason it is in the interest of a lot of people to make highly sophisticated software to aid it.

d) It is fairly easy to comprehend and for that reason it is used my many people around the world.

Disadvantages of technical analysis

a) although it helps in reducing losses, when it fails, the impact is usually very severe.

b) technical analysis focuses on charts but not emotions and society, which means that natural occurrences can affect the prices of assets without being identified by technical analysis.

c)government sanctions can affect the market and won't be identified by a lot of people.

My advice to anyone using technical analysis is to be cautious and reasonable. Huge investments should not be made because a person feels they have done proper analysis.

Conclusion

Technical analysis is something I know has been keeping the global market steady for a while, alongside fundamental analysis. We make good decisions using technical analysis but we should not be carried away.