Different types of market analysis

To begin, let's look at three ways on how you would analyze and develop ideas to trade the market. There are three basic types of market analysis:

• Technical Analysis
• Fundamental Analysis
• Sentiment Analysis

As crypto market demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

Technical analysis

Technical Analysis is the forecasting of future financial price movements based on an examination of past price movements. Like weather forecasting, technical analysis does not result in absolute predictions about the future.

Instead, technical analysis can help investors anticipate what is "likely" to happen to prices over time. Technical analysis uses a wide variety of charts that show price over time.

Fundamental analysis

the price of any asset is determined by demand and supply.

So, if the demand becomes higher than the supply, then price starts to increase. If the supply becomes higher or, which is the same, demand becomes lower – then price starts to decrease.

So, the subject of fundamental analysis is the investigation of which factors can and do have influence on demand and supply, and, in turn, on price and make price to change.

Although there are a lot of such factors, all of them are well-known, as well as their possible effect on demand and supply.

Fundamental analysis is dedicated to the investigation of economic, political and social factors that have an effect on an underlying asset.

Sentiment Analysis

Sentimental analysis is a bit more delicate substance than Technical and Fundamental analysis.

Although technical analysis tells us that “price includes all available information” and that price is all trader’s need to make a deal decision – things are not so simple.

We will not debate now on does price really reflect all available information or not – let’s assume that it does, but this point doesn’t mean that all traders open positions in the same direction.

Of course every trader sees the direction of the market, but almost everyone has its own explanation why does market move particularly this way.

But take a look at this moment from different side – maybe the market moves in this particular way (up or down), because it just mirrors what all traders think about it.

Each trader opens positions according to his or her own thoughts and opinions about the market, and, it fact, all these positions create that substance that we call market sentiment.

So which one should I use?

There are lot of argues concerning what type of analysis is better. Although it will be perfect to have an excellent knowledge and practical skills for each type, Here in Crypto Intelligence Agency (CIA), we will not state that it is absolutely necessary.

Many market participants and authorities tell that it will be better if trader perfectly governs with all three ways of analysis. Well, it’s difficult to argue with this statement.

Theoretically – yes, but talking about real life - in general, depending on own tasks and trading way most traders make some particular type as primary and others types as supportive one.

It assumes that trader should have perfect knowledge and application skills at least in single type of analysis and have a common knowledge with the others.

But this common knowledge is absolutely necessary, because you should have at least general understanding of what is going on the market. I will be absolutely happy if you will become a master in all three types of analysis, but I suggest that you should start at least from one of them.

And later you can calmly choose preferable type and decide – do you really need perfect level for all of them, or just for one and familiar With others.

Support and resistance

Let’s explain shortly about support and resistance. Support- Support is the price level at which demand is thought to be strong enough to prevent the price from declining further.

Resistance- Support is the price level at which demand is thought to be strong enough to prevent the price from rising further.

Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets, prices are driven by excessive supply (down) and demand (up).

Supply is synonymous with bearish, bears and selling. Demand is synonymous with bullish, bulls and buying. These terms are used interchangeably throughout this and other articles.

As crypto market demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, prices move sideways as bulls and bears slug it out for control.

Economic Calendar

Calendar used by the financial community to determine when major economic reports on items such as unemployment or housing data are scheduled to be released.

Traders may shift the direction of the market as the release date approaches especially if the report has the possibility of being bad.

Professional traders pay close attention to global events by using an economic calendar. By having the release schedule for each economic indicator, a trader can foresee when major movements will happen.

The most influential events in crypto trading are market caps, trade volumes, circulating supplies and max supplies among other factors.

It's important to note that there are several free resources available online that traders can use to help them determine the date/time of future market-moving events.

What are the best Trading Hours?

Generally speaking, the most active traders trading hours, are between the London markets opening around 8:00 GMT and end with the markets in the US closing around 22:00 GMT.

The absolute busiest time in the markets are during the London to US overlap between 13:00 GMT to 16:00 GMT. These are the hours that are the most liquid or when the most traders are in the markets making trades. If your intention is to do day trading, these are key hours!

There are 3 major sessions each day in the forex markets that could also be applicable to the crypto market to a certain extent. They are the London session, the US session, and the Asian Session.

The London Session

The London session starts around 8:00 GMT and winds down around 1600 GMT. The digital assets that are the most active during these hours are the cryptocurrencies of: Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP). You will also find a big volume of other altcoins such as Bitcoin Cash (BCH), Cardano (ADA), Tron (TRX), Stellar (XLM) and many others.

The US Session

The US session starts around 1300 GMT and winds down around 22:00 GMT. The digital assets that are the most active during these hours are the same as the London session above.

The Asian Session

The Asian trading session is centered in Tokyo but spans many countries and covers the hours of 11pm and 8am GMT. The digital assets that are the most active during these hours are the same as the US session above.

Chart Types

There are a lot of different types of charts that have an application in the real market. The most popular are:

1. Line chart

2. Bar chart

3. Candlestick chart

Line chart

This is the simplest chart type; it looks like a simple line. There is time on the X-axis and price on the Y-axis. This line links close price of each trading period – on the daily time frame, the trading period is single day, on a weekly chart it is one week.

So, by linking together close prices for each trading period, we can see the price behavior during some period of time.

Bar chart

Besides just showing a close price for period like it was on line chart, bar chart also shows open price for trading period, as well as the high price and the low price.

The assignment of X and Y axis are the same. Here is how you read an OHLC bar. The tick on the left represents the opening price. The tick on the right represents the closing pricing.

The vertical bar displays the extreme high and low price movement for a particular stock during the day.

Now, don't get confused when looking at weekly OHLC charts. The only difference here is the time frame you are looking at. Same principles apply as mentioned above. Same goes for monthly time frames.

Candlestick chart

A candlestick chart is a style of bar-chart used primarily to describe price movements of a security, derivative, or currency over time.

It is a combination of a line-chart and a bar-chart, in that each bar represents the range of price movement over a given time interval. It is most often used in technical analysis of equity and currency price patterns. They appear superficially similar to box plots, but are unrelated.

Hedging

For a day trader, not only do crypto trading gives you the opportunity to make a great deal of money with a small move in the market, but they also give a trader an instrument to hedge cryptocurrency positions.

The concept of hedging is the act of reducing the amount of risk that you currently have on your books. For example, if you had a long call position, you could reduce your delta risk by shorting the same underlying asset.

Traders hedge their positions when the risks are not in their favor, or when a piece of news is about to come out and the information will create some uncertainty which might create volatility within the market.

So how can a trader use the crypto trading market to hedge some underlying risk? Let’s say an BTC cryptocurrency trader wanted to hedge his long exposure to the BTC/USD right before Binance crypto exchange announces their financial decisions.

The trader could purchase a below option for the period overlapping Binance exchange announcement with an amount that would allow him to make a percentage of the notional value of the BTC/USD position that is held.

If the announcement contained some information that caused the market to fall for a few hours (over even longer), the trader would be protected.

Use Technical Strategies

One of the many crypto trading tips to being successful is to have a well-planned strategy and of course to use a winning technical strategies.

This is essential if the account is to succeed. In today’s financial world, crypto trading is one of the easiest investment schemes used by traders.

Technical strategies are a great way for the trader to get into any position with high confidence and much more winning percentage. It should be used to help the investor become a successful trader.