Can traders really trade without Technical Analysis?
This is a really good question, that I intended to tell you the answer from the beginning: Can a trader really trade without Technical Analysis?
The answer is of course NOT. It might happen in other special/traditional market such as Stock Market (hard) or Commodity Market, but not Crypto Markets. Why? This article will tell you why you cannot trade Crypto without using Technical Analysis.
I. What is Technical Analysis?
Technical analysis is the study of historical market data, including price and volume. Using insights from market psychology, behavioral economics, and quantitative analysis, technical analysts aim to use past performance to predict future market behavior. The two most common forms of technical analysis are chart patterns and technical (statistical) indicators.
Technical analysis is a blanket term for a variety of strategies that depend on interpretation of price action in a stock. Most technical analysis is focused on determining whether or not a current trend will continue and, if not, when it will reverse. Some technical analysts swear by trendlines, others use candlestick formations, and yet others prefer bands and boxes created through a mathematical visualization. Most technical analysts use some combination of tools to recognize potential entry and exit points for trades. A chart formation may indicate an entry point for a short seller, for example, but the trader will look at moving averages for different time periods to confirm that a breakdown is likely.
II. What is Fundamental Analysis?
Fundamental analysis (FA) is a method of measuring a security’s intrinsic value by examining related economic and financial factors. Fundamental analysts study anything that can affect the security’s value, from macroeconomic factors such as the state of the economy and industry conditions to microeconomic factors like the effectiveness of the company’s management.
The end goal is to arrive at a number that an investor can compare with a security’s current price in order to see whether the security is undervalued or overvalued.
This method of stock analysis is considered to be in contrast to technical analysis, which forecasts the direction of prices through an analysis of historical market data such as price and volume.
III. Why you cannot trade Crypto without using Technical Analysis?
In other markets, the topic of TA vs FA is still currently up for debate until today, with no clear winner.
Whereas technical analysts believe the best approach is to follow the trend as it forms through market action, fundamental analysts believe the market often overlooks value. Fundamental analysts will ignore chart trends in favor of digging through the balance sheet and the market profile of a company in search of intrinsic value not currently reflected in the price. There are many examples of successful investors using fundamental or technical analysis to guide their trading and even those who incorporate elements of both. On the whole, however, technical analysis lends itself to a faster investing pace, whereas as fundamental analysis generally has a longer decision timeline and holding period by virtue to the time going into doing the due diligence.
But in the crypto market, you just simply CANNOT use Fundamental Analysis to trade, simply because it lacks Fundamental aspect.
Most crypto projects do not have a clear business model. And even if they do, the business model hardly reflect the price. The crypto project tokens also have no intrinsic value, and no profit to be shared among investors.
You can still surely INVEST in Crypto market using Fundamental Analysis, but not TRADE with that only.
