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For a professional investor, there is nothing more important than the ability to predict the dynamics of market behavior and use it to maximize profits. Of course, the strategy &#34;guessed – not guessed&#34; is not applicable here. Fortunately, the modern mathematical apparatus allows you to use a variety of statistical methods to solve the tasks.Currently, two types of price behavior predicting are most widespread: fundamental and technical analysis. Both of them are applicable both for assessing the behavior of digital assets, and on the traditional<a href="https://bit.team/ru" rel="noopener noreferrer nofollow"> BIT.TEAM</a>, including where all the necessary tools are available. Today we will introduce you to a simpler type of statistical analysis - technical.<h2 id="header-0">Differences between technical and fundamental analysis</h2>Technical analysis is understood as the use of methods for predicting the value of assets based on the study of previous history, taking into account trading volumes. This approach is considered standard for classical financial markets, in particular, for buying/selling stocks and other valuable assets, including cryptocurrencies.Fundamental analysis involves calculating the dynamics of price changes taking into account a number of specific factors.The simplest analogy is synoptic forecasts. Two strategies are also used here: classical, with an approximation of temperature fluctuations in previous days and years, and progressive, when the weather forecast is built using computer modeling, taking into account factors such as the current speed and direction of winds, clouds, the presence of significant cyclones/anticyclones, etc.A logical question arises: which strategy gives more accurate results? There is no unambiguous answer here: technical analysis based on a powerful statistical sample can be quite truthful, as well as fundamental. In the latter case, much depends on the number of factors taken into account: the more of them, the more accurate the forecast.The first mention of the use of technical analysis in finance dates back to the XVII century (Amsterdam), similar methods were used in Japan in the XVIII century. Modern approaches to the use of technical analysis were outlined by an American journalist, an expert in finance and economics, Charles Dow. The founder of the most famous modern financial institution, The Wall Street Journal, managed to understand the patterns in the movement of some assets and markets in general. He outlined his vision of these trends in a work named after him. The Dow theory has essentially become the starting point in the further development of technical analysis methods.Before the advent of computers, technical analysis was performed manually, was time-consuming and not very accurate. Currently, traders and investors are very actively using this tool to predict the behavior of financial assets.<h2 id="header-1">Principles of technical analysis</h2>So, the basic principle of technical analysis is the use of past and current prices of the asset of interest to predict future ones, mainly in the short term, where the accuracy of the forecast is maximum. The main postulate of the theory is that fluctuations in value are not random, and with the right approach, well-interpreted trends can be obtained. The second, no less important postulate of technical analysis is the repeatability of history.Without going into details in depth, it can be argued that TA is a method consisting in studying the level of supply/demand, which in general determine the mood of the market. And the patterns here should be looked for in the fluctuations of the asset price. Which depends on the human factor: fear, forcing you to sell an asset, and greed, forcing you to buy it.The higher the trading volume, the higher the effectiveness of technical analysis. Its accuracy also depends on the liquidity of the asset. The fact is that markets characterized by large trading volumes are less dependent on price manipulation, including those based on external influences. So the results of the technical analysis are more predictable and truthful.There are several common methods of conducting technical analysis based on the approximation of price change charts, which are called indicators. They allow traders and investors to predict the direction of movement of the value of assets, which can be used to make instant profits. To reduce risks (and they always exist, since it is impossible to take everything into account), several indicators are usually used to get average results.<h2 id="header-2">TA indicators</h2>Currently, there are many indicators and metrics that allow you to analyze price charts (in any time interval) to determine current market trends.Here are some of the most common indicators applicable to the cryptocurrency market:<ul><li>SMA. The method of simple moving averages is perhaps the most popular indicator among traders. Uses data on closing prices of digital assets for the time interval of interest;</li><li>EMA. Modification of SMA, exponential moving average method. Here the main focus is on the analysis of closing prices in the nearby time interval;</li><li>RSI. Another popular indicator. The relative strength index belongs to a line of indicators called oscillators. Here, mathematical methods are used for forecasting, interpreting graph data over a certain period of time;</li><li>BB. Bollinger lines are another common indicator among oscillators. It is calculated by constructing lower/upper bounds for the moving average. The main scope of the Bollinger bands is to assess the volatility of the cryptocurrency, as well as its potential oversold/overbought.</li></ul>There are also indicators based on the use of data obtained through the simple indicators listed above. So, the stochastic RSI indicator analyzes the data obtained by a simple RSI. The MACD indicator uses two EMA indicators to plot the convergence-divergence curve of moving averages by subtracting the initial data.<h2 id="header-3">Trading Signals</h2>As a rule, indicators are used to track general market trends. But this does not prevent in the least from determining possible entry/exit points, that is, to fix the signals of buying / selling cryptocurrencies. To do this, indicators such as RSI are used, which take a value in the range from 0 to 100. The actual signal can be a significant event observed on the original graph. So, if the RSI value exceeds the threshold of 70, this indicates that the currency is overbought, that is, a potential exit point. On the contrary, a drop in the RSI below 30 indicates that the asset is oversold, and this is the time to buy it.It should be noted that trading signals obtained by technical analysis methods are not always highly accurate, especially in relation to the volatile cryptocurrency market, where trading volumes are smaller and price fluctuations are less predictable.<h2 id="header-4">Disadvantages of technical analysis</h2>Despite the prevalence of TA, many financial experts consider it an insufficiently reliable forecasting tool. Moreover, among specialists, the name &#34;self-fulfilling prophecy&#34; was fixed for technical analysis. This term is general in nature, describing events whose probability of occurrence is high only because a critical mass of people believed in such a result.Indeed, the more traders and investors use a particular type of indicator as a guide to action, the lower the probability that their forecast will be correct. A simple example that demonstrates the validity of this statement. Let&#39;s say you are researching the bitcoin price chart using such a tool of our crypto exchange as<a href="https://coinmarketrate.com/ru/currency/bitcoin" rel="noopener noreferrer nofollow"> CoinMarketRate</a>. On the November segment, a downward trend is visible (which began on November 5 and has a clearly pronounced slope). By November 9, a certain number of traders decide to get rid of BTC in order to prevent further losses, and on the 10th, as a result, there is a rollback with a transition to a sideways trend.But if we use several indicators, it is likely that the end of the downtrend could have been foreseen.<h2 id="header-5">Which analysis is better: technical or fundamental?</h2>Technical analysis uses statistical methods based on the interpretation of historical data. Fundamental also applies mathematics, but in a broader sense, relying more on qualitative factors and their diversity. In other words, fundamental analysis is less tied to the historical dynamics of pricing.Such specialization leaves an imprint on the specifics of using fundamental analysis: it is used if they want to evaluate a digital asset or even an entire business, based on the interpretation of a large number of diverse macro- and microeconomic factors (the state of the industry, market capitalization, reputation of the asset or company, growth rates, etc.).That is, technical analysis is a tool that allows you to predict the upcoming behavior of the cryptocurrency or the market as a whole. Fundamental analysis is used for other purposes – to assess the degree of overvaluation/undervaluation of a digital asset.And although both methods of analysis are necessary to predict the behavior of cryptocurrencies, the technical one gives the best results in the short term, and the fundamental one is better used to track &#34;long-playing&#34; trends. That is, TA is the prerogative of traders, and FA is the prerogative of investors.An important advantage of technical analysis is its focus on large data arrays, which are calculated fairly well using statistical formulas. Fundamental analysis relies on qualitative characteristics that are not always objective.On the other hand, even technical analysis based on empirical information is also characterized by some subjectivity. Very often, traders, analyzing price change charts and building indicators, inadvertently distort the results depending on whether they intend to sell or buy an asset. In addition, technical analysis may not meet your expectations if the overall market trends look too blurry.In any case, the use of TA can significantly improve forecasting, and any active trader of our exchange can confirm this. Even the simplest visual analysis of the cost charts of the cryptocurrency you are interested in, carried out using<a href="https://bit.team/ru" rel="noopener noreferrer nofollow"> BIT.TEAM</a> services, will allow you to receive a small

Technical analysis as a tool for evaluating the behavior of a digital asset

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