Whether or not you are a bitcoin owner, at some point in time you may want to know how to interpret and predict its price. In order to do this, you have to learn to analyze bitcoin price charts available on the majority of financial sites. The financial abbreviation of bitcoin is BTC or XBC, which is how you find the necessary cryptocurrency. After that, you will see charts and complementary information on how bitcoin is traded over a certain time period. It can be an hour, a day, a week or a more prolonged time period.
As a rule, both fundamental and technical analysis are used by traders to predict price movements of cryptocurrency or any other securities. Fundamental analysis attempts to estimate the intrinsic value of the security. Even though this method works best for analyzing stocks, it can be used for the analysis of virtually any kind of security. However, technical analysis is largely used by traders because it gives a good picture of cryptocurrency market performance and allows to make precise estimations based on this data. Let’s discuss some of the most popular methods of technical analysis used for cryptocurrency price forecasting.
- Candlestick Chart. In fact, traders can choose the format of chart that will be most suitable for them. Linear or bar chart are also convenient and informative. Yet, the majority of traders like candlesticks because they allow to understand what is going on the chart almost intuitively. The green and red candlesticks colors stand for bullish and bearish markets respectively. Each candlestick also shows the opening and the closing, the highest and the lowest prices during the trading period. Each of the candlestick adds up to the chart, forming a picture of security trading. Investors identify many patterns in candlestick movements that signal whether the market goes up or down.
- Trends. Traders have a saying, “Trend is your friend.” Drawing uptrends and downtrends on the chart can help you clearly see the way price moves along these lines and in between them. Price movements between the upper and the lower trendline forms a trend channel, which is one of the most widely used concepts in technical analysis.
- Elliott Wave Analysis. This types of technical analysis uses crowd psychology to predict the behavior of the majority of investors on the particular market. The assumption underlying this type of analysis is that market moves in waves, i.e. cycles. Knowing how to see these five waves allows investors to predict market behavior and make successful investment decisions.
- Fibonacci Levels. This method is based on looking for support and resistance levels on the chart. It allows to see the price range and decide on potential buying and selling opportunities.
- Stochastics and Relative Strength Index (RSI) allows to identify whether the cryptocurrency is overbought or oversold. It is believed to be an oscillator because it moves between low of zero and high of 100. For bitcoin price forecasting, this method is especially useful since cryptocurrencies are usually traded in the conditions of high volatility.
In order to conduct a good analysis, choose one technique that you understand well and move from there. Do not overanalyze the chart using more than one technique because it can overcloud the picture and lead you in the wrong direction.