BIT Blog

7 Common Mistakes in Crypto Technical Analysis

7 Common Mistakes in Crypto Technical Analysis

Technical analysis is best used as a tool for profitable trading. The best way to be profitable in the markets is to have small losses and big wins. It helps traders create good risk/reward ratios by looking at significant price levels. It can also help you place a trade in the direction of least resistance for a good chance of catching a trend. Everything else is just opinions and predictions.

It is one of many ways to predict the market's future based on the crypto market's previous behavior or volume data. Since technical analysis is something every trader wants to use, they are bound to make mistakes. These mistakes are made repeatedly, which hinder the crypto trader from making progress. At the end of this article, you will understand mistakes to avoid when using technical analysis.

Common Mistakes to Avoid in Crypto Technical Analysis

1. Making the chart look complex with too many indicators

It's essential to learn the usage of indicators for anyone using technical analysis. Using one indicator seems low the same way ten indicators prove to be much. Anything more than three indicators is much. Some amateur crypto traders add at least one indicator every time they experience a loss in their trade, which may result in information overload. You should make your crypto chart as simple as possible for better understanding.

2. Using the right indicator

Technical indicators are a fundamental part of technical analysis and are typically plotted as chart patterns used to predict market trends. Indicators spread across price chart data to indicate where the price is moving or whether the price is in an overbought or oversold condition.

Over the years, many technical indicators have been developed. Traders have also developed a variety of indicators intending to get better results in their trade. Some indicators function well in range-bound action, while some work excellently in trending markets.

3. Following emotion instead of signals

Crypto markets encompass losses and gains. While trading, it is easy for traders to allow emotions set into their trades and make them lose focus, even to the extent of ignoring a stop loss point, believing that they are doing the right thing and the market will change. Traders need to know when to start or stop a trade.  Greed and fear are major emotions that determine the success of a trade. Summarily, crypto traders can be successful with their trade if they only work hard and overcome their emotions.

4. Trading for revenge

Traders are always in a hurry to make back significant losses in their crypto trade. This process is referred to as revenge trading. It's advisable not to trade after suffering a substantial loss as this may even cause more losses. Emotion will set in, and you feel like trading heavily to regain your losses.

Experienced crypto traders don't trade for some time after their losses. They relax, rethink, and strategize on getting a better trade. As a crypto trader or technical analyst, it is always important to avoid emotional decisions. Sticking to your trading plan in times of fear is vital. Staying calm after a significant loss or mistake, avoiding emotional choices, and focusing on keeping a logical, analytical mindset are all attributes of a good crypto trader.

5. Technical analysis is relative, not absolute:

Technical analysis is not static. It deals with probabilities. This means that whatever technical approach your crypto strategies are based on, there’s no assurance that the market will work as you expect. As such, it's essential to consider this while setting up your crypto trading strategies. Irrespective of how a trade is experienced, it’s never a good idea to always think the market will follow your analysis. If you do that, you are risking a huge financial loss.

6 . Overstocking the market:

For any active crypto trader, it’s a common mistake always to think they need to be in a trade. Some trading strategies require you to wait long before getting a reliable signal to start a trade. Some crypto traders enter as low as three trades annually and still produce noticeable returns.

You don’t always have to be in a trade. As a matter of fact, in some market conditions, it’s more profitable to do nothing and wait for a better opportunity to surface. This way, you protect your capital and have it ready for use as soon as good trading opportunities show up again.

7.  Following other traders blindly:

All successful crypto traders have quite different strategies. A strategy that works perfectly for one trader may not be feasible for another. There are numerous ways to make profits in the crypto markets. The best thing to do is to find which one personally suits you.

Starting a trade based on someone else’s analysis might work out just a few times. However, if you follow other crypto traders blindly without understanding the underlying context, it won’t work over the long term.

This doesn't imply that one shouldn't follow and learn from others. The important thing is whether you agree with the trade idea and whether it fits into your crypto trading system. You should not blindly follow other traders, even if they are experienced and reputable.

Closing Thoughts

We have learned some fundamental mistakes technical analysts and traders make when using technical analysis. Considering that trading is not easy, it’s advisable to approach it with a longer-term mindset. It is tedious and takes time to become a good and consistent trader.

It requires a lot of practice in improving your crypto trading strategies and learning how to formulate your trade ideas. This way, you can identify your strengths, mark out your weaknesses, and be in charge of your crypto investment and trading decisions.

Trade Crypto on

With the mission to create an entire ecosystem for blockchain-based financial transactions, stands as the world’s 2nd largest crypto options exchange.
Sign up on, and switch on your future.

Sign Up Now