Hello everyone. This is the @ahmadchemist737. I welcome you in another season of steemit crypto academy. This week, we have been taught about the Starting Crypto trading. This is my homework task.
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Question 1-
In your own words, what is fundamental analysis? Do you think it is important for a trader? Justify the answer.
The crypto market require the traders to consider multiple factors before start trading. This is because volatile nature of the crypto market. The crypto prices change when the demand and supply change. The buyers and seller activities effect the crypto price and the market experience the up and downtrend.
So trader should have proper knowledge about the market activities. The traders and investors need to analyze the market before making an investment or withdrawing the capital. They need to analyze the market to get to know about the future of the market. The analysis of the crypto market help the trader to predict the future direction and future price. The traders then can trade more successfully.
The Fundamental is the way of analyzing the market and predict where the market will move in future. Multiple points are there which the traders consider to perform fundamental analysis. The traders do not use the historical data of the market but some other parameters are focused.
to take the trading decision. In the fundamental analysis, the traders need to consider some important points. Instead of using the historical data, the traders consider the economic and the financial events to predict the market future. Then they use the analysis outcome to predict what will happen in future.
There are a lot of the points which the traders need to be focused on to get the better prediction and then the outcomes is use to take the trading decisions. In the fundamental analysis, the investors consider the news, herds, rumors about crypto coin and also the government policies.
The government policies effect the coin price so much. If the government allow the crypto trading in their currently, the coin spike up. If they ban, the crypto market effect badly. The government policies and planning related to the crypto market is analyzed.
Then the rumors and news about the crypto market also effect the price. SO the traders can also analyze the market in fundamental analysis through the news and rumors. For example, the Elon Musk when tweeted about Dogecoin, this news effect the market positively and the Doge coin price spike up because of the heavy demand.
<pThen another way to perform the fundamental analysis is to read the white paper of the coin which you are interested to invest. Multiple other factors like market capitalization, project goals, team hard work, the road map also are consider while performing the fundamental analysis.- Importance of Fundamental Analysis to Traders
The fundamental analysis is very best for the long term traders. The traders who have plan to invest for long time period should go for the fundamental analysis. The fundamental analysis is very easy and help to predict the market is very effective way.
The traders can make the best trading decisions after analyzing the market through this method. This is best analyzing method for the market which have the high volatility.
Question 2 - Explain what you understand by technical analysis and show the differences with fundamental analysis.
- Technical analysis
The historical data of the price is use to predict the future price. The past asset's price is use by the traders in the technical analysis. The crypto market is not constant but prices keep changing. The prices changes because the traders perform trading using the emotions and sentiments repeatedly. So the history keep repeating. That's why the past and historical data is use to identify the market next move.
This type of the analysis use the different tools and indicators to analyze the market. Here the graphical tools are being used. The tools use in the technical analysis are the chart, graph, indicators. The market structure also helpful to predict the future direction. The traders even consider the price action and price movement to determine what will happen next in crypto world.
Mostly traders use the technical analysis method to analyze the market, But the investors of long term prefer the fundamental analysis method.
Executing a Sell Order in the Cryptocurrency Market Using Support and Resistance
The resistance level is the level where the price of the asset is suppose to move downward direction. At the resistance level, the buying pressure deplete and the sellers are allowed to enter into the market and push the price downward. The sellers are then in control in the market. Huge pending selling order executed which push the market downward. The price bounce off the resistance level and the trend reverse into bearish. Resistance level give the selling signals.
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In the below chart, i have identified the support and resistance level. These points have the high selling and buying pressure. The price first break the support level, then started increasing. Then it break the resistance level. Currently the price is at the resistance level. I identify it the best selling point. I set the stop lose, take profit and place the sell order.
Executing a Buy Order in the Crryptocurrency Market Using Support and Resistance
The support level is the level where the price of the asset is suppose to move upward direction. At the support level, the selling pressure deplete and the buyers are allowed to enter into the market and rise the price upward. The buyers are then come in control in the market. Huge pending buying order executed which push the market upward. The price bounce off the support level and the trend reverse into bullish. The support level produce the best buying spots.
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In the below chart, i have identified the support and resistance level. These points have the high selling and buying pressure. The price first break the resistance level, then started decreasing. Then it break the support level and reverse its direction. After breaking the resistance level, the uptrend is expected. So i will place the buy order after breaking the support level. For this, i set the stop level and take profit with ratio 1:2.
Understanding 'Hanging Man' and 'Leaking Star'
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Hanging Man Candle Stick
This candle is formed at the end of the bullish trend where the price of the open and close candlestick is same. Here the struggle between the seller and buyers highlighted. The sellers are dominant with high selling pressure. After formation of the hanging man, the buying pressure reduced and coin start moving downward.
Here the candle open with the bearish momentum which push the market down side. The price decline. The selling pressure get increase. Then the buyers enter into the market and push the market back upward. Then at the end, they closes almost at same price.
This produce the signals that the current trend is about to end and the new trend can be start at any time. This produce the sell signals. The downtrend is expected so the traders should sell their coins and leave the market in order to save from the risk. When we combine it with other technical indicators, the results become more accurate and efficient.
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Shooting Star candle stick
Shooting or Leaking Star'
The Shooting star is also a bearish trend reversal which appear at the end of the uptrend. This candlestick is form at the peak of the bullish trend and produce the bearish trend reversal signals. This candlestick have short body with long upper wick. It has a long shadow at above side.
This candle is formed at the end of the bullish trend where the price of the open and close candlestick is same. Here the struggle between the seller and buyers highlighted. After formation of the hanging man, the buying pressure reduced and coin start moving downward.
Here the candle open with the bullish momentum which push the market upper side. The price rise. sellers enter into the market and push market downward. Then selling pressure get increase and finally closes at the same price.
This produce the signals that the current trend is about to end and the new trend can be start at any time. This produce the sell signals. The downtrend is expected so the traders should sell their coins and leave the market in order to save from the risk. When we combine it with other technical indicators, the results become more accurate and efficient.
Conclusion
The fundamental and technical, both are very important and the popular analysis method. The traders select the method suitable for their trading plans. The technical analysis is best for short term traders while fundamental is suitable for long term traders. The technical analysis use the historical data for price prediction. The fundamental analysis use the other important factor like market cap, GDP, white paper, team goal, etc to analyze the market. Then we studied the shooting star and hanging man candlestick. Both produce the bearish trend reversal signals and give the selling signals.
Cc:@pelon53
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