Today we will clarify if the technical analysis works here just as well as on other markets, how this can be used plus a few rules that will help you to succeed.
In my opinion, on this market technical analysis works better than on the other markets, as I mentioned in my previous articles, most investors or traders here are unaware. All charts on altcoins show their emotions and expectations, fears and greed. To understand the example below, we need to understand a few bases of technical analysis.
Technical analysis basics
Candlestick analysis gives us a visual understanding of price movement
There are 3 types of Candlesticks:
- Bearish Candlesticks where the most bearish are a pure red candle
- Bullish Candlesticks where the most bullish are a pure green candle
- Neutral Candlesticks
We recommend concentrating on these 13 types of candles
Pivot is the point where the price stopped and completely changed direction. The more bars are creating a HL or LH, the stronger is pivot.
- HL = Low of current candle is above the previous candle’s low
- LH = High of current candle is below High of previous candle
- HH = High of current candle is above High of previous candle
- LL = Low of the current candle is below the low of the previous candle
Definition from the textbook: A trend is a price movement in a certain direction over a period of time. Technical definition: the trend is determined by its past pivots. You need at least two pivots to determine the trend.
My strategy on altcoins based on technical analysis
In the following example we will use the LTCBTC chart.
In most cases when a coin begins to be traded, a strong extra move is taking place in the beginning.
After that, all people who bought these coins at ICO, seeing additional income, will start selling some of their coins, at the same time those who have failed to buy at ICO but have bought at market price (at price Much worse than on ICO) seeing that price drops are starting to sells coins in order not to lose money or to fix the losses, which causes a strong downward move. In most cases, this movement turns into a strong downtrend over a longer period.
The moment we are interested in is when the price breaks the downward trend *with volume and creates a consolidation afterwards, when consolidation is broken *with volume we will enter. This pattern can be found on almost all crypto currencies.
*The chances that these pattern will work greatly increase if you fundamentally analyze what is behind this coin.