There are two schools of thought when it comes to approaching the market: fundamental and technical analysis. Both of these methods are used for research and to forecast future trends in asset prices.

Essentially, fundamental analysis is a method geared towards attempting to calculate the intrinsic value of an asset. This entails studying virtually everything there is to study, from overall conditions of the economy and the industry to the financial and managerial conditions specific to a particular company.

In this case, all the research boils down to one simple question: is this particular asset worth investing in? To answer this question, fundamental analysts need to look deep into the asset and the company behind it. Is the company’s revenue growing? Is it actually profitable? Do they have any debts and if yes are they going to be able to repay them? Is their product capable of outperforming their competitors’ creations in the future?

A company’s, and, by extension, an asset’s downfall can come from any direction: they can run out of money, their product can turn out to be faulty, or it may happen because of a scandal. For instance, in March 2018 Facebook’s shares tumbled down 10%, an equivalent of $50 billion, in light of the news about a political consultancy company gaining an inappropriate access to data on over 50 million users.

Clearly, a thorough fundamental analysis entails not just a thorough research into a company’s affairs, but also the similar in-depth inquiries into all its competitors and their product. Moreover, it requires a comprehensive understanding of the world’s economy, the particular jurisdiction’s economy, legislation, the current political climate, all worldwide events that can affect the asset’s price in one way or another.

On the other hand, technical analysis is based on the assumption that an asset’s price already fully reflects all publicly-available information and the asset’s price and volume and the only two inputs. Thus, technical analysis is all about studying graphs and identifying patterns and trends that might potentially suggest what the asset is going to do in the future. There are a lot of different forms of technical analysis ranging from the simplest ones to the most complicated, but in this article, we will cover the most popular ones.

Support and Resistance. This is a method of understanding an asset’s past history, which is fundamental in predicting its future. At the price of an asset fluctuates it forms a graph with an obviously visible peak and bottom prices for the given period. Drawing a line along a series of peaks will show the support level, while a line the goes along the lowest points is called a resistance line. As a rule, strong levels of support usually appear at points that have a lot of large buying orders, while strong resistance appears where there are large selling orders.

Trends. After drawing the support and resistance lines, a channel in-between them can serve as a mean to forecast trends. If the lines are going up, it means that despite possible fluctuations, the current market is dominated by buying orders. If they’re going down — the majority of people are getting rid of the asset. Finally, a flat trend where the lines are horizontal indicates a relative parity between buyers and sellers.

Trading Volume. This means the number of assets that trade over a certain period, usually one day. Analysing the volume behind price reversals is paramount for successful trading. For instance, is you see a 7% increase in the price of the asset after a long-term downtrend and there was no substantial amount of volume behind the move, then chances are this move was nothing more than just a fluke. In case the volume behind that rise was substantially higher than average then it could be the start of a new trend.

Moving Averages. This is a slightly different approach in a sense that it’s entirely based on mathematical formulas. The most common type of moving average is called the Simple Moving Average (SMA). In the traditional markets, it’s calculated by taking the sum of closing prices over a fixed period of time and dividing them by the total number of prices used in the calculation. For instance, a 7-day SMA takes the last 7 closing prices and divides them by 7. The rules here are simple: if the current price is higher than the SMA, then the price is going up and vice-versa.

Patterns. The history tends to repeat itself, and this is also true when it comes to trading. There are dozens of different price patterns: Pennant, Head and Shoulders, Cup and Handle, Double/Triple Bottom/Top, Ascending/Descending Triangle, Flag, Rounding Bottom and so on and so forth.

It is worth pointing out that the aforementioned strategies, as well as the numerous more complicated ones, should not be the subject of choice. Professional traders usually approach the market using at least several of them and cross-referencing the results. Obviously, it takes a lot of practice, focus and attention to the smallest details. The more calculations you can perform in the shortest period of time the better you’re going to do on the market.

These days, any basic computer can outperform the most genius and well-trained human brain when it comes to calculations and data analysis. So, this should come as no surprise that various software has been aiding the efforts of market analysts for a very long time. That includes specialized software for automated technical analysis, day trading software and entire Automated Trading Systems (ATS) that automatically create and submit orders on exchanges.

Those also come in various types for different purposes. There’s Algorithmic Trading, which is a method of executing orders that are too large to be filled all at once or can potentially disrupt the market. It uses automated and pre-programmed trading instructions, which take variables such as price, time and volume into considerations to send small parts of the order out to the market over time.

One of the most common types of algorithmic trading is called High-Frequency Trading, which is essentially trading on steroids. It leverages rather sophisticated technologies and algorithms to facilitate high-speed, high-turnover trading with very short-term investment horizons.

Without any doubt, automated trading is an extremely helpful tool when it comes to trading cryptocurrencies, as the market is prone to volatility, very dependant on the never-ending cycle of news and announcements and all the exchanges are open 24/7, making it very difficult to constantly monitor the situation for a lot of investors who have lives outside of trading.

That is why Aximetria is developing its very own, unique automated trading algorithms so that our clients can treat cryptocurrency trading as a hobby, and rest assured that their funds are safe.