Technical and fundamental analysis are two main approaches to analyzing financial markets, which help traders and investors make informed decisions about buying, selling, and holding assets.
Technical analysis is a collection of tools for forecasting probable price changes based on patterns of past price changes in similar circumstances. It is based on the principle that market situations constantly repeat themselves. This is due to the psychology of market participants being the same, and they act according to the same principles.
Technical analysis uses a variety of charts to display price over time. The analysis itself is partly based on mathematical and statistical calculations, traders use price charts, indicators, patterns, and various technical models.
Fundamental analysis evaluates the fundamental factors affecting an asset’s price, such as news, economic data, financial indicators, and technological changes. It may also include an analysis of the blockchain, development teams, and fundamental principles of the protocol.
Forecasting the movement of cryptocurrency prices using fundamental analysis can be more challenging than technical analysis in certain cases. Since crypto is an asset with controversial regulation, its value may not correlate with world events. Therefore, it’s important to follow news and indicators that have a direct relation to the crypto market as a whole, or to a specific project.
TA focuses on short-term periods (hours, days), while fundamental analysis is often used for longer-term forecasts. TA is more technical and can often be automated , while FA can be more subjective and dependent on data interpretation.
Many traders and investors combine TA and FA to get a comprehensive picture of the market.