In this post, I will be discussing why I use technical analysis and what I consider to be my edge or advantage of technical analysis. I personally love tech analysis although these days I only use a few indicators and a simple strategy.
Over the years I have delved into this technical analysis rabbit hole and you really can go as deep as you want into indicators and theories etc… but at the end of the day what really works and what do you need to know? Do I need to be a mathematical genius to make tech analysis work for me? No you don’t it can be simple and easy you have to learn the language of the market, let’s have a chat about it.
Advantages Disadvantages Technical Analysis
First, what is Technical analysis? In simple terms, it is the use of tools and indicators to interpret price movement, volume and volatility. In the old days, it was done by plotting lines manually on hand-drawn charts, now we have the internet and a multitude of tools at the click of a mouse. Technical analysis can be used on any security with historical trading data. Need to know more check out Investopedia – Technical Analysis
There is also some good books out there on this subject specific to crypto like – Technical Analysis of Cryptocurrencies: 1
Although it can get as technical as you like it does not have to be hard and you do not need to know it all to trade crypto successfully.
What is Fundamental analysis? Investopdia says – Fundamental analysis (FA) is a method of measuring a security’s intrinsic value by examining related economic and financial factors. Click this link for full version >>>> Fundamentals. In my words reading the news to find out what is happening with a particular coin. Finding out what news events might drive the price of a coin in one direction or another.
So why not Fundamental analysis you ask? For me I am not interested in fundamentals, that doesn’t mean I totally ignore fundamentals when trading. I do need to know when some major fundamentals might move the market but apart from that I am not really interested in fundamentals and I think it is open to subjectiveness – it is someone opinion. Some traders only use fundamentals and trade well, for me I love the charts and identifying trends and all the tech analysis stuff, it is just my personal preference, I also loved maths at school. The way I trade I only use Tech analysis so I will discuss that.
It can be Simple.
Like the chart above you can make it complicated or like the chart below it can be simple.
This chart is a simple way that I use tech analysis to identify my entries, A couple of moving averages and a simply MACD that is it, you don’t need all the other crap on your charts. I will say that I do use horizontal support and resistance levels and sometimes Fibonacci but that is it.
Over the years I have tried all sorts of tech analysis and studied all sorts of indicators. What you have to remember is that they are just Indicators they follow price movement, they indicate what might happen. What I found are the more indicators I studied and added the more reasons I had not to trade. I had a perfectly good strategy that I thought I could improve by adding another filter/indicator but it would just contradict an already proven system and give me a reason not to trade. Frustrating I thought learning all these indicators for tech analysis would surely give me a big advantage, well it didn’t it just stopped me from trading. Now I have gone back to basics, have a good sound strategy and I am back to creating wealth with crypto.
Why I use Technical Analysis
I find tech analysis very interesting, like when you draw a Fibonacci level on a chart and watch price hit it exactly and then move off, it is like a self-fulfilling prophecy, I get a kick out of that. Technical analysis does really work. Fibonacci numbers occur in nature everywhere it is a little freaky. The spiral segments in that seashell all relate to Fibonacci. If you want to go down the Fibonacci rabbit hole Start here with Wikipedia >>>>>> Fib Rabbit Hole
The main reason I use tech analysis the way I do is that it is not open to subjectiveness, which means the signal is either there or it is not. I literally have a checklist and tick the boxes, if I can tick all the boxes I put the trade on. If I can not tick the boxes there is NO trade, simple. This approach helps me to take the emotion out of trading. I know I have an edge with my strategy and if I can tick the boxes I place the trade – no emotion because I know over the long term I will be in front. Sure I have losing trades but overall I will come out in front, It is just a game of probabilities and I have the edge. Trading this way takes the emotion out of trading for me which means I can make sound trading decisions. This is very important in trading and is the main reason I love using technical analysis.
I mainly trade short term, I can be in a trade anywhere from a few minutes to a few days, technical analysis is suited to this style of trading. Fundamental analysis is usually used for longer-term trading. So we have established I trade short term and only use a few indicators like I said it can be relatively simple, you don’t need to make it complicated. There are hundreds of indicators to use and hundreds of strategies that work so which one will you choose.
So I hope you could take something away from this article – Advantage of Technical Analysis
If you want to know how I personally use technical analysis to create Wealth with Crypto, the strategy and what indicators I use, have a read of my post Trader Cobb Review – It is worth your Coin? At the end of the day to create true Wealth with Crypto you need to find what suits you personally, Tech analysis is not for everyone. I have found a good mentor with the results to back it up in TraderCobb and I will continue to use the TraderCobb Method because it works for me.
Remember if you STOP your journey to creating Wealth with Crypto you are Guaranteed to Fail!