Difference Between Fundamental vs. Technical Analysis
Those who wish to enter the crypto space without a full understanding of fundamental and technical analysis are simply limiting themselves by way of half-baked strategies.
For traders, these terminologies set the stage for understanding the dynamics of the markets and crypto specifically.
What is fundamental analysis?
Fundamental analysis involves evaluating the intrinsic value of an asset, such as stocks or cryptocurrencies, and analyzing the relevant factors that could affect its future price. In addition to financial statements and industry news, this type of analysis looks at external events and influences. The goal of fundamental analysis is to make financial predictions based on historical and current data.
For fundamental analysis, various tools and techniques can be used, which can be divided into two types: top-down analysis and bottom-up analysis. The top-down analysis gives a broader view of the entire economy, where an analyst can begin with the view of the entire market before narrowing it down to specific sectors, industries, and companies.
A bottom-up analysis, however, begins with a specific stock and expands out to consider all of the factors that impact its price, and the analyst is trying to gain a better understanding of the market as a whole. Currently, these basic principles are being applied in the crypto space as well.
Performing fundamental analysis requires an understanding of the factors that can influence the price movement of crypto (in this case) for example, the issue of FUD which can arise due to government regulations, decrees, and laws that discourage or dissuade people from trading and handling crypto assets.
There have been numerous occasions in the past where this has affected the prices of crypto assets, such as continued bans of crypto assets by governments and the liquidation of exchanges due to theft of assets by hackers. Also, new information may be associated with the fact that a project has been listed on an exchange or that the developers have recently upgraded the project. As a result of information obtained before the listing on the proposed exchange, the traders would seek to make some profits through arbitrage trading on other trading platforms or exchanges.
What is Technical Analysis?
Technical analysis, on the other hand, is a method for examining, predicting, and analyzing market price movements using historical price charts and statistical data. According to the theory, if a trader can identify previous market patterns, they can predict future price trajectories relatively accurately, which can be beneficial for their trading strategies.
Some of the tools required for carrying out technical analysis (TA) include but are not limited to Moving Average Convergence Divergence (MACD), Support and Resistance (SR), Bollinger Bands (BB), Moving averages (MA), oscillators, Fibonacci retracement, candlesticks, and so on.
These tools are basic for every trader who intends to use technical analysis for predicting the future price of the market no matter what kind of assets is being traded.
Using the tools for trading requires some level of diligence and continuous practice. There is a distinction between TA and FA, which is why we will continue to provide educational content to ensure users understand how to utilize the tools to achieve their financial goals.
With the fantastic partnership between Klever and TradingView, Klever has also been able to utilize all the technical analysis tools available to traders on our platform, allowing users to conduct enhanced analysis before executing their trades in a Klever way.
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