How to Use Tech Analysis When Trading Crypto

In the previous lesson, ya boi discussed how to vibe check specific cryptocurrencies you’re tryna catch feels for. Develop a directional bias (yup, like if you’re feeling “bullish” or “bearish”), and then suss if there’s any juicy trade ideas (going “long” or “short”) 🌍.

Once you got your bias from the fundamentals, time to slide into potential entry prices (“entries”) for that trade, and know when to bounce with exit prices (“exits”) to secure the bag or say rip to those coins. 💸

If you’re a discretionary trader, you’re prob using technical analysis (TA) and price action (PA) for this. 🤓

This lesson’s all about getting lit with TA and PA to score those entry and exit points while trading the cryptos. 🚀

What’s the market price, tho? 🤔

Before we dive into what TA and PA are, we gotta chitchat about what that market price even is and why it’s flipping like TikTok trends in the financial markets. 🎢

Price is basically where a buyer and seller are like, “Yo, let’s trade here.”

Imagine we’re at a farmers’ market, and there’s a dude selling a bag of apples for a crispy $1.00. If you or anyone else is like “bet” and gives that dollar for the apples, then the market price is $1.00. 🍎💵

But if no peep cops those apples for $1.00, the farmer might drop the vibe to $0.95 (or even lower) until people start buying.

And if peeps are feening for those apples and buy ‘em all for $1.00, the farmer might sneak the price up to $1.10 (or more) until everyone chills on the apple hype.

Now, in the financial jungle, it’s like the same deal but times a billion. 🌐 In these markets, there’s a mob of buyers and sellers for one asset, each with their own take on costs and trades. 🤝

Deals go down quick—like microseconds quick—depending on what’s poppin’ with the asset. ⏱️

With tons of players making moves every sec, the market price is always sliding based on the buyer-seller balance, AKA the asset’s supply and demand. 🔄

It’s like no chance to know what every player’s plotting or their reasons for trading at their prices. 🕵️

There’s a whole squad from small retail “fish” 🐠 to big money “whales” 🐳, all trading off vibes, numbers, or vibes with elephants or something. 🤷‍♂️

So, basically, knowing every trader’s thoughts is a no-go, but we can say the price mirrors all known deets about the asset and what folks are feeling globally. 🌎

And that brings us back to price action and technical analysis.

What is price action? And TA? 😎

Price action and technical analysis are all about catching the vibe check on market sentiment of an asset via visual or math remixes of its price history.

Checking this angle, traders catch when the mood was bullish, bearish, or just meh, spotting the flip-points or mood changes. 🔄

To level up this idea, let's peep some price action and technical analysis on Bitcoin versus the U.S. dollar (BTC/USD) and see what the traders are vibing:

In the chart up top, BTC/USD price action on that four-hour grind is shown, and yo, during November, traders were bearish, flipping BTC from almost $70K to a chill $54K by month’s end. 😱

Also, $58K and $60K were hyped spots, first as support in October, then breaking and turning into resistance come November, signaling sell vibes if bear feels hold up. 📉

Else, it might just draw in the buy crew if the price pops above shortly.

I also have this dope indicator down low, the MACD indicator. This guy’s like the vibe check on when price momentum might be peaking. 📈✨

In our scene, MACD climbing higher suggests the recent BTC/USD lift from $54K to $58K could be extra, making a TA case that selling might get back on track. 😅

So, if your fundamental vibes say BTC/USD might see more sell-offs ahead, then our chart analysis hits the same points, strengthening a bear case. 🐻

Ya feel me? 🤔

If that was all alien talk, no sweat! You can learn the MACD and other indicators by rolling over to our technical analysis lessons for newbies at the School of Pipsology! 📚✨

But before you skedaddle there, check out this wisdom to remember when diving into it.

Tips on Using Technical Analysis and Price Action 😎💡

Yes, “doing too much” is def a thing in the TA and PA world.

Too many indicators all over the place can lead to something we call “analysis paralysis.” That’s when tools start fighting each other—one says “buy,” the other’s like “sell.” 🤯

Dig into different TA and PA tools and chill with no more than 2 or 3 that click with you. Practice them consistently.

Multicollinearity is when you bring the same vibe more than once statistically. Good TA usage needs dodging multicollinearity with multiple tools. Avoid tools that are “collinear” ‘cause they spill similar tea. 🚫📊

Technicals alone as a trade idea tool? Nah fam, don’t go there. ☝️

For real, don’t rely on just TA or PA for generating trade ideas, especially in crypto! 🚫

They’re always looking in the rearview and won’t spill about big upcoming moves or why the market's vibing whichever way. 🌪️

If you just lean on TA/PA, a surprise event might just come outta nowhere and take you by surprise. 😬

That’s why it’s chill for newbies to catch trade ideas with fundamental analysis, then dig into TA and PA for where to jump in and dip from trades. 🙌