Steemit Crypto Academy Contest / S15W6 - Chartist Analysis

Edited using Inshot

In the market, the first thing to know is that prices tends to move in patterns. These patterns are identified by looking at past/historical data and spotting recurring trends or shapes. One example is the "trend line" which is a line drawn on a chart connecting the high or low points of a price series. This can help one to determine if the prices are moving up, dow or even sideways.

Closing the Window for Season 15 of the Steemit Engagement Challenge, we're been presented with an interesting topic to discuss about by the Steemit Crypto Academy which is Chartist Analysis. The Chartist Analysis is a type of technical analysis that can be used to predict future price movement and make trading decisions.

Are you ready to dig a little deeper into this concept of technical analysis? With the aid of the contest tips, here is a well detailed post explaining the "Chartist Analysis"

edited using pixellab

Chartist analysis is a technique used to analyse price trends and predict future price movements in the financial market using charts and patterns. The basic idea is that price moves in trends (which I mentioned above), and these trends can be identified by analysing historical price data.

Chartists believe that by identifying patterns in the chart, market data can provide insight, clues prediction about future price movements. By understanding these patterns, it is made easier for chartist to make better investment decisions..

The importance of chart patterns

• One of the main reason chart patterns are of importance is that they can help traders identify possible buying and selling opportunities as well determining when to enter and exit trades. By making analysis of the patterns, traders can attempt to decide whether the market is likely to progress in it present direction or reverse course.

• Chart patterns are also important because it can help to indicate when a market is experiencing an overbought or oversold condition, which can be useful in determining positions to take.

• Chart patterns are also important because they can provide traders with clues about the strength or weakness of a trend which can help traders to make decisions about the suitable risk/reward ratio for their trades.

The shoulder head shoulder pattern is regarded as a reliable reversal indicator, which means that it is often used to identify when the market is about to take a change in direction(bullish-to-bearish trend reversal). The shoulder head and shoulder pattern is made up of three peaks. The first peak is known as the left shoulder, the second peak is called the head and the third peak is described as the right peak.

The shoulder head and shoulder pattern forms when an assets' price rises to it peak, and decline back to the base of the former up move. The "head" is formed when the price rises above the previous price state and then falls back to the original state.

This pattern is confirmed when the neckline, - the line connecting the first peak(left shoulder )and the second peak (right shoulder) has the price breaking below. When this occurs, it is considered a signal that the market is about to reverse direction.

Screenshot from tradingview app

An inverse head and shoulder pattern is simply the direct opposite of a correct head and shoulder pattern. It is formed during a downtrend and is usually accompanied by an upward reversal. The formation of the inverse head and shoulder pattern begins with a low, that is followed by a higher low, forming the left shoulder (first peak). Then, the price moves up to from the head, followed by another move down to form the right shoulder (third peak).

In an inverse head and shoulder pattern the neckline is the line connecting the top of the two outer peaks. In confirmation of the inverse head and shoulder pattern, the price breaks above the neckline. Once this occurs, there shall be an upward trend in the market.

Screenshot from tradingview app

Analysing the price of Steem as well as other cryptocurrencies can be done by the aid of technical analysis using chart patterns. Chart patterns can be useful for identifying trends and predicting upcoming/future price movements. Chart patterns can be helpful because of possible identification of buying or selling opportunities as well as entry and exit decisions in trades. The importance of chart patterns above as answered in the second question is enough reason already.

However, it is very important to keep in mind that these patterns are not always to be relied on and can sometimes give out false signals. Therefore, it's important to use other forms of technical analysis such as moving averages, support and resistance levels and indicators like Relative Strength Index(RSI), and Moving Average Convergence Divergence (MACD), in addition to chart patterns. Combining this tools can help to get a more complete picture of the market and make informed decisions.

In conclusion, while chart patterns can be useful in technical analysis of STEEM and other altcoins, they should not be exclusively relied on. The past performance or price movement of an asset is not an assurance for future results, and even the most well-developed patterns can fail.

Thanks for reading

I invite @bossj23, @alli001 and @sahmie