Whether you are an investor or a trader, using market analysis can help you identify new investment opportunities, improve your risk management, and spot the general direction the market is currently moving towards.
There are two types of market analysis: Technical Analysis and Fundamental Analysis, and we will explore both.
Technical Analysis is used not only to identify when to enter and exit a new position but also to manage the risk of your existing position.
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In Technical Analysis, the assumption is that patterns in recent or historical price movements repeat themselves in the future. It focuses on predicting the future price movement of an asset by studying its historical and most recent price performance, market data, and sentiment.
In general, Technical Analysis looks at the following broad indicators:
- Price trends
- Chart patterns
- Support and resistance levels
And technical indicators such as
- Volume and momentum indicators
- And moving averages
While Technical Analysis is helpful for understanding when is the best time for making a trade, it doesn’t help you to pick the best assets to trade.
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Fundamental Analysis, on the other side, allows you to assess the real value of an asset, also called ‘intrinsic value.’ Based on qualitative and quantitative metrics, Fundamental Analysis gauges whether an asset is overvalued or undervalued compared to its current market price, depending on internal and external indicators.
For studying Fundamental Analysis, a trader or investor looks into the fundamentals of an asset, including the project’s utility, the team, the roadmap, network activity, the rate of user adoption, community support, as well as the overall economic and market conditions.
Generally speaking, Fundamental Analysis is better suited for long-term investment as the assessed information usually plays out over a longer time frame, compared to historic technical price patterns assessed in Technical Analysis, which typically play out over a short time horizon.
Done correctly, Technical and Fundamental analysis can give you a holistic view of when to buy and what to buy.
GammaX is an order book-based decentralized derivatives exchange with an on-chain transaction settlement layer and an off-chain order book and matching engine to provide the best user experience. And to ensure Ethereum compatibility at a low cost, we’re partnering with StarkWare’s Layer 2 scaling solution – StarkEX.