An Introduction to Crypto: Technical and Fundamental Analysis


Are you a beginner who is trying to understand how to trade crypto? Are you confused by Crypto? Well, it doesn’t have to be that way. Let’s explore the specifics of crypto trading in this lesson and find out how crypto traders do technical and fundamental analysis differently from Forex traders.

Crypto trading is not that different from Forex trading, where the aim is for a cryptocurrency trader to make profitable trades by accurately forecasting the markets. One valuable tool that can help you achieve this, is the use of both technical analysis and fundamental analysis which can be generated from blockchain and cryptocurrencies news.

Why use Crypto Technical Analysis

When it comes to cryptocurrency, the effectiveness of technical analysis is questioned by some, as the instrument’s behaviour on crypto exchanges (cryptocurrencies, tokens, etc.) can be influenced by certain groups of traders, resulting in sudden and substantial increases in volumes. Even so, many market participants can still leverage on technical analysis instruments to successfully forecast prices.

Take note that analysing cryptocurrency from a technical perspective usually consists of these 4 main aspects:

  • Chart;
  • Sell and buy orders list;
  • History of transactions;
  • Trading volumes conducted on exchanges.

Why use Crypto Fundamental Analysis

While news trading strategies have been proven to be extremely useful, it can be difficult to find relevant and timely information as mass media crypto news is usually published with a long delay, which greatly diminishes its value to traders. That’s why other than from mainstream news outlets, you should always look out for alternative sources for news such as crypto forums and blogs. On such platforms, you can find that experts often post invaluable insights and perspectives on the state of the market.

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It is also important to note that any major movements on the cryptocurrency exchanges are usually caused by small groups of investors. While few in numbers, these groups trade in huge volumes, and it is these huge volumes that can make significant shifts in the market. These groups of traders often act independently, and are not likely to broadcast their plans in advance. This means you have to detect the beginning of such events and act accordingly.

An even more difficult situation can occur when some traders collaborate to intentionally cause a drastic price movement in order to entice new traders to take action. This can spark off a chain reaction that causes massive disruptions to the market, resulting in a mass buying trend that is likely to leave these new investors high and dry.

Valuable tips for Crypto Traders

For any trader, greed will ultimately lead to disappointment. Stick to your forecast and refrain from being too greedy. It is always better to have lower gains than to lose it all just because your “gut” tells you that you can earn even more. You should also practice lots of patience, and this applies to both maintaining open positions and waiting for more reliable entry signals. By following these simple rules, you’ll soon learn how to trade cryptocurrencies the right way – by avoiding unplanned and impulsive entries in hope of great momentum.

DOM (Depth of Market window)

This is an important source of information for every crypto trader. As volume size and market capitalization are crucial considerations that reflect the mood of other traders, knowledge of such information will enable you to better forecast future movements.

Now that you’ve gained a clearer understanding of Crypto, all you need to do is find the broker to trade with. If you're looking for a secure, feature-rich and rewarding platform, then start off your journey with Forex4you today.

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.

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