Basics: Long-Term Technical Analysis
Technical Analysis is typically used by swing traders and scalpers trying to determine short-term price action in a given option, however some forms of Technical Analysis are applicable to long-term price action. In this article we’ll discuss my subjective view of what works and what doesn’t within long-term cryptocurrency technical analysis.
What candle-stick time frame is considered “long-term”?
1W, 3D, 1D are three candle-stick time frames one should check when observing long-term price action. An option must have sufficient amounts of data in order to assess macro-trends within said option.
Within TA, they’re few pillars of truth we can latch onto. Volume remains one of these pillars in the entire spectrum of trading. Volume is data that informs the trader on what the crowd sentiment is.
Liquidity: Traders/Investors with deep pockets look for options that have consistently high volume in order to enter and exit the option without the risk of “slippage”.
Slippage: The difference between the price a trader intended to exit and the price they actually exited.
Identifying Momentum Using Volume: Price action and volume are typically synchronized with overall sentiment, as volume will confirm or deny breakout movements.
Accumulation/Distribution: Price Ranges that undergo the most amount of volume or circulation, indicating that traders are either Accumulating or Distributing.
Diagonal Support/Resistance Trends (arbitrary):
Preface: Support/Resistance lines are much more successful on larger time-frames, as traders who plan on using this to scalp should proceed with caution. ❌
As mentioned above, these diagonal lines are arbitrary, therefore plotting them “correctly” is important in determining crowd psychology. First, we look for outliers within the price data (peaks/troughs). Next we’ll draw a line through a minimum of two data points in order to gauge the price/time action.
The image above illustrates the data points used to determine the support and resistance trends. (yellow stars)
It’s important to remember that these lines are not guaranteed methods of predicting price action, however they should be used in conjunction.
What information can we obtain from this data?
Chart Patterns: With millions of transactions occurring daily, we need a way of illustrating crowd sentiment. Chart patterns operate under the assumption that history repeats itself, however this mindset can lead traders dumbfounded when their quantification fails. Chart Patterns have an established criteria that one must adhere to, however this doesn’t mean they’re guaranteed to work 100% of the time.
What Chart Patterns work in Crypto?
This comes from an opinionated standpoint, however I would list their validity as follows:
-Symmetrical Triangle (Pennant/Flag)
Using Volume, Trend Analysis, and Chart Patterns in conjunction can help the trader analyze long-term price action. Trend Analysis and Chart Patterns shouldn’t be used with certain conviction on short-term price action as they can be more susceptible to failure.
The intention of this article was to re-enforce the fundamentals within Technical Analysis, as they’re quintessential when examining long-term price action. Next medium article will address advanced methods of determine long-term price movement.
I appreciate the support, it encourages me to keep making these articles. 🤘