Nobody just wakes up to place a trade in the market whether longing a particular asset or shorting it. Also, no person just enters the market to buy and accumulate any kind of crypto asset. There is always a factor that propels a person to make a financial decision in the crypto market. There's always that thing that gives a trader and investor the push to buy or sell an asset. That decision making enabler is what is being referred to as trading analysis.
Cryptocurrency investors and retail traders act based on their individual analysis. Worthy of note is the fact that analysis could end up being correct or wrong thereby leading to gains or losses respectively. Hence, there is a need to be very careful with decisions. You cannot afford to make wrong moves or FOMO without having a strong bases.
Digressing back to the topic of this article, trading analysis are majorly classified into two and they include:
- Fundamental Analysis and
- Technical Analysis
There's always been a controversy on which approach is better as well, different views being that we all have different preferences and understanding. However, I'll share my own view on which one I prefer.
To start with, Technical analysis (TA), often referred to as charting, is a type of analysis that aims to predict future market behavior based on previous price action and volume data. Not everyone carry out technical analysis because it is more complicated than the other; it requires learning and understanding of chart indicators. For this reason, we often here of beginner traders paying the experts for signals. There are many indicators and tools needed for carrying out technical analysis and a few indicators are: Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), Bollinger Bands, Moving Average (MA) etc. All of these have their individual applications and usages but a good knowledge of all is very important as there related to each other.
On the other hand, Fundamental Analysis which is the basic type of trading analysis is purely based on news. Yeah, it's as simple as that; people tend to buy the news and then sell the bottom. With fundamental analysis, you don't need any special skill or interpretation of charts. The fundamental analysis considers that the future performance of an asset is dependent on much more than just historical data.
All you need do is watch and stay updated with cryptocurrency news relating to any particular asset. It is the best analysis for me because it rarely fails compared to TA. Technical analysis has failed many times and will always fail. I'm not saying TA is bad but FA is better and more reliable for me.
A good interplay of fundamental analysis is the launch of WLEO on Uniswap. LEO pumped just following the news of its listing on Uniswap whereas no TA could predict that quick price movement. Inasmuch as one shouldn't be entirely dependent on TA, both analysis are needed to survive in the cryptocurrency market.
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