Technical analysis is a method used by traders and analysts to evaluate the past price movements and trading volumes of assets, such as cryptocurrencies like Bitcoin and Ethereum, in order to make informed predictions about future price movements. Here's a general description of how technical analysis works for these two cryptocurrencies:
Price Charts: Technical analysis begins with the examination of price charts. Traders commonly use candlestick charts, line charts, or bar charts to represent historical price data. Each candlestick or bar on the chart represents a specific time frame (e.g., 1 hour, 1 day) and includes information about the opening, closing, high, and low prices for that period.
Support and Resistance Levels: Analysts identify key support and resistance levels on the chart. Support levels represent price points where the asset tends to find buying interest and potentially reverse its downtrend. Resistance levels represent price points where the asset tends to face selling pressure and potentially reverse its uptrend.
Trend Analysis: Technical analysts determine the overall trend of the cryptocurrency. Trends can be upward (bullish), downward (bearish), or sideways (range-bound). They often use moving averages and trendlines to identify and confirm trends.