The core principle of technical analysis is that market prices reflect all available information that could affect the market. Therefore, there is no need to pay attention to the economy, fundamentals, or new developments, as they are already factored into the price of a given BTC. Technical analysts generally believe that when it comes to the overall psychology of the market, prices move with trends and history tends to repeat itself. The two main types of technical analysis are chart patterns and technical (statistical) indicators.

Chart patterns are a subjective form of technical analysis where technicians attempt to identify areas of support and resistance on a chart by looking at specific patterns. These patterns are based on psychological factors and are designed to predict where price will go after a breakout or breakdown at a specific price point and time. For example, the ascending triangle chart pattern is a bullish chart pattern that displays a key resistance area. A breakout of this resistance level could result in a significant move higher.

Technical indicators are a statistical form of technical analysis where technicians apply various mathematical formulas to price and volume. The most common technical indicator is the moving average, which smooths price data to help spot trends more easily. More complex technical indicators include the Moving Average Convergence Divergence (MACD), which looks at the interaction between multiple moving averages. Many trading systems are based on technical indicators because they can be quantified.

The difference between technical analysis and fundamental analysis

Fundamental and technical analysis are two schools of thought in the financial world. Technical analysts believe that the best approach is to follow trends formed by market behavior, while fundamental analysts believe that the market tends to ignore value. Fundamental analysts ignore chart trends and instead dig into the market heat profile of token projects to find intrinsic value that is not currently reflected in the price. There are many examples of successful investors using fundamental or technical analysis to guide their trades, and even a combination of the two. But in general, technical analysis helps to speed up the pace of investment, while fundamental analysis usually has a longer decision time and holding period due to the time required for additional due diligence.