Welcome to the third episode
of our Luno trading series,
in the last episodes,
we covered the basics of crypto trading,
and we dived into some of the strategies,
traders and investors employ,
from hodling to day trading,
if these strategies are
going to work though,
you need to analyze the market.
And that's what we're
going to dive into today.
At the end of the day,
if your goal is to make a profit,
only one thing really matters.
Buy low, sell high.
Of course, that simple statement
is a lot easier said than done.
No one can predict the future,
not even Elon Musk,
if they could, we'd all be rich.
So the key is to identify
when the lows and highs
are more likely to come.
To do this,
there are certain methods
of market analysis,
that crypto traders and
investors commonly use
in their decision making process.
The two most common
forms of market analysis
are technical analysis and fundamental,
both have their limitations
and schools of thought
against the theories,
but used in the right way with logic,
they can help you to make
more informed trades.
Let's start off with technical analysis.
So what is technical analysis?
Technical analysis is built on the premise
that history repeats itself.
It focuses mainly on
historical market data,
such as trading volume
and past pricing trends,
essentially fear and greed,
with technical analysis
you look at this data
and use it to build a clearer picture
of the market sentiment
by identifying patterns
of a repeat behaviors,
are people buying or are they selling?
Are they acting out of fear or greed?
We're essentially trying to
figure out what people did
and use this to predict
what they would do.
This can help you to make
calculated predictions,
about when the market will
be bearish trending down
or bullish trending up,
this method of analysis
essentially assumes that
price movements aren't random
and that past patterns
will hold in the future.
But the thing with assumptions is
any number of factors could
have influenced the price
to move in a specific direction,
technical analysis only really
looks at supply and demand
and the price of a coin,
as the price goes up,
you can expect it to become bearish.
At some point as people try to capitalize
by selling their coins
and the price will fall as other traders,
try and get out,
believing it is the best
price they will get.
And so the cycle continues.
If used correctly,
technical analysis can certainly
form a pillar of your thought process
and some traders swear by it.
At the same time though,
you can't predict the future
simply by looking at the past
Which brings us to fundamental analysis.
Fundamentals is more of
a big picture approach
like who is running the company
or the business behind an asset,
what their reputation is,
who their competitors are
and looking at the overall
industry in general,
for example, if you
judge the intrinsic value
to be lower than its current market price,
you can trade accordingly and in theory,
make a profit.
You can also look at things
such as transaction volume
and user activity to gauge consumer demand
as well as retail adoption.
And of course, finally,
global economic events
can exert a powerful influence
on cryptocurrency prices.
It is important to incorporate
these economic shifts
when using fundamental
analysis in a trading strategy.
This includes both scheduled
and unscheduled events
like the Bitcoin halving
or government intervention,
a highly publicized and
important crypto related event,
such as the halving, for example,
has a clear impact on
the future supply rate
of the currency.
You can plan for this
and incorporate it into your models.
Equally, an unscheduled event
could have an even greater impact.
This is obviously harder
to take into account.
You still need to know how to respond
to such unplanned events,
if and when they occur.
When it comes down to choosing
which techniques to use,
a combination of both
is probably a good idea.
If you do decide to start trading,
make sure to be cautious during this phase
and never invest more than
you can afford to lose,
do your own research.
The more you know, the more
successful you will be.
Remember, this is an art,
no one gets it on their first tries.
Don't forget to subscribe
and smash that bell.
So you never miss a thing.
And as always #TOTHEMOON.
