Introduction to Technical Analysis
One of the three pillars of Market Analysis is Technical Analysis (TA).
For appropriate financial instruments, (e.g. Swing Trading, momentum trading etc.), technical analysis is generally accepted as a valid trading logic competancy.
As a predominately 'arbitrage' platform, the Decentia platfom makes only limited use of technical analysis.
However, Technical Analysis does have potential to direct the Decentia search engine to new areas of volatility, for subsequent analysis and trading.
A Technical Analysis (TA) engine interprets price & volume data, to identify 'areas of interest' for trading.
A TA engine often uses Fibonacci ratios to anticipate market retracement and Fibonacci extensions to help predict potential price targets.
TA operates across several time-frames (e.g. weekly) to enable the platform to identify important levels of support and resistance, over time.
TA uses Indicators and Oscillators including moving averages, MACD, Stochastic and Bollinger bands to help identify trade entry and exit points.
TA identifies trading channels by identifying upper and lower trend lines. Channels are used to buy at channel support and sell at channel resistance.
TA utilises identifies common chart patterns (e.g. double tops/bottoms) to help define trading activity and increase the chances of making profitable trades.
Algorithmic passive Trading
CyberTrade - Technical Analysis
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Technical indicators & Oscillators.
As anyone who has engaged in manual trading knows, there are a range of indicators and oscillators. For example moving average indicators to indicate and anticipate market direction. The Bollinger Band indicator is good for adding 'outer lines' to identify entry and exit points.
The MACD oscillator measures the strength of the convergence/divergence between moving averages and identifies bullish/bearish behaviour. The Stochastic oscillator is used in range-bound markets to help identify entry and exit points.
Chart Patterns in Crypto Trading.
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Common chart patters include; Double tops & bottoms, head & shoulders, wedges & flags, triangles & pennants.
Chart patterns are often combined with Fibonacci to identify retracement opportunities. It also combines chart patterns with Fibonacci extensions to identify potential price targets.
Technical Analysis - Price trends & History
Technical Analysis works because price moves in short, medium and long term trends. The next price point is more likely to be the continuation of a trend than an erratic new price point.
Technical Analysis works because price movements have a repetitive nature (e.g. Elliot waves). This is often attributed to market psychology which tends to be predictable based on human emotions of fear and excitement.
Putting it all together.
CyberTrade takes a 'Holistic Approach' and subscribes to the concept of 'Market Analysis', incorporating a degree of 'Technical Analysis' .
In the context of the 'Decentia' (Decentralised Intelligent Arbitrage) platform, Technical Analysis can be used to help guide the search for the 'volatility' that drives arbitrage opportunities.
This presents the possibility of directing searches to 'likely' areas of future volatility and thereby spotting new opportunities faster than competitors and using that speed to financial advantage.
In the context of Decentia platform, technical analysis feeds into the Decentia 'Volatility search engine', at the 'front' of the Decentia processing pipeline.
