Discover the Top Ten Technical Analysis Mistakes You Should Avoid while doing Crypto Trading and the Solution for Your Trading Profitability and Consistency.
Gunbot Ultimate Guide Top 10 Crypto Technical Analysis Mistakes
How Gunbot can help you avoid these costly crypto trading mistakes.
In this article, you will learn about the most common technical analysis mistakes and what you can do about them… Let’s get started!
What is Technical Analysis?
Technical Analysis is a method used for efficient trading, relying on technical indicators, which are used to assess investments and find out new trading opportunities.
The analysis is carried out with historical data obtained from trading activities such as volume and price, thereby predicting market trends.
They are based on a simple assumption that changes in the price of any tradable instruments, such as forex, gold, cryptocurrencies, which are subject to changes based on demand and supply, can be predicted.
No matter how erratic price movements exist, past trends of price movements of similar trading equipment repeat over time. So, on paper, it is a handy method to make financial analysis.
Obviously, this is just a simple introduction to get you warmed up on the subject, but feel free to dig more into the full Technical Analysis Definition later on if you like…
Important Trading Indicators Used in Technical Analysis
Whether you’re a manual trader or are trading with Gunbot, you can use the help of specific indicators to identify patterns and predict the price movement of an asset. Some expert traders even make their own indicators to predict changes in the market.
You can learn more about Technical Indicators you can use to trade with Gunbot.
But to keep it simple, let us discuss 5 of the most commonly used technical analysis indicators.
Here’s an example of these 5 technical Indicators in a Gunbot GUI Chart
- Moving Average (MA)
It is based on past data and hence, is also known as a lagging indicator. Traders use moving average to check the price trends in the recent past and predict its future movements.
The longer the period of the moving average, the greater is its lag. Traders may also take the help of moving average data to make buying or selling decisions.
If they find that the moving average for a shorter period is lesser than the moving average for a longer period, then the trader may choose to sell the asset by predicting that maybe the market is reversing.
2. Relative Strength Index (RSI)
Relative Strength Index has values ranging from 0-100. These values represent the rate of price changes of a particular asset.
Relative Strength Index is also known as momentum indicator. If both the momentum and the price are rising, then it is predicted that more buyers are getting drawn to the asset.
On the contrary, if the momentum decreases and the price continues to rise, it is predicted that sellers will control the market price. As per conventional norms, if Relative Strength Index is above 70, then the asset is bought more, and if it is below 30, then the asset is sold more.
3. Stochastic Relative Strength Index (Stochastic RSI)
It is a derivate of the Relative Strength Index (RSI). Unlike RSI, which provides values based on price changes, the Stochastic RSI derives RSI values. With the help of the Stochastic oscillator formula, these values are derived.
The values range from 0 to 1. When it provides a value over 0.8, then the asset is bought more, and when the value is below 0.2, then the asset is considered to be sold more. It is a good indicator if you want to know when the RSI values are near their range’s extremes.
4. Bollinger Bands (BB)
Bollinger bands will help you to get an idea about the volatility of the market. It also indicates when an asset is overbought or oversold.
They consist of three bands, namely the middle band, upper band, and lower band. The middle band represents the simple moving average.
The distance of the bands from each other represents the volatility of the market.
If the price is closer to the upper band, then the asset is considered to be overbought, while if the price is closer to the lower band, then the asset is considered to be oversold.
Usually, the price stays between the bands, but on rare occasions, if it is above or below the two extreme bands, it represents extreme market conditions.
When we talk about Bollinger Bands, then there is an important concept of the squeeze.
It lays down the theory that if the bands are close to each other, it represents a highly volatile market, while if the bands are far away from each other, it represents a less volatile market.
5. Moving Average Convergence Divergence (MACD)
Similar to RSI, MACD is a momentum indicator. It indicates an asset’s momentum by representing the relationship between two moving averages, namely signal line and MACD line.
You can look at the divergences between the MACD line and the price action to determine a market trend’s consistency.
You can also make buying or selling decisions based on the convergence of the MACD line and the signal line. It may suggest you buy if the MACD line crosses and moves over the signal line, and if the MACD line crosses and moves below the signal line, it may suggest you sell the assets.
Besides these five indicators, there are many more indicators that are used to analyze market trends. Sometimes they are used individually, and sometimes they are used in combination with others.
With advanced techniques introduced in the market, new indicators cropped up to solve the mysteries of trading.
Whit that out of the way, let’s jump on the meat and potatoes of this article…
Top Ten Technical Analysis Mistakes You Should Avoid on Crypto Trading
Since the cryptocurrency market is very volatile, trading needs to be done very carefully. The conventional norms of trading analysis may not hold in all cases.
If you are interested in crypto trading or have started trading and new to the market, be cautious of some common mistakes new traders commit.
Technical Analysis Mistakes – Focusing Only on Profits
Being courageous in trading is good because, after all, it is a game of risks. However, it is important to remember one golden rule: trading is all about reducing the losses and saving your capital. Only when you will save enough capital, then only you should take big risks.
You have to accept that there will be losses in trading and embrace that idea instead of running away from it.
Nobody can claim that they have figured out the market completely. So with more experience in trading, it raises your chances of actually making profits and worry less about incurring losses.
Nowadays, some applications are available to test your strategies without losing real money and getting a rough idea about the actual market results.
And here is your first opportunity to Capitalize on the Gunbot Backtesting Add-on; this amazing tool allows you to “backtest” your strategy on TradingView without using your real money.
The strategy of cutting your losses is a strategy for the long run. Because always remember, “slow and steady wins the race.”
Technical Analysis Mistakes – Overtrading
Once you feel you are getting the hang of trading, it is easy to get drawn into the game. You may fall into the trap of overtrading.
According to some seasoned traders, it is wiser to have a “wait and watch” approach to crypto trading. Following the market trends and predicting future trends can help you to save your capital to invest at the right time.
Some traders involve in short-term trading with market trends and analysis with a shorter time frame. However, such trades are the riskiest type of trade.
If you are starting trading with low capital or starting trade with high capital but less experience, you should always go for long-term trading to have more time to analyze the market trends and take calculated risks.
You can certainly use higher time frame periods with Gunbot, but really overtrading here, in this case, could be trying to use too many pairs at once; this is something I’ve seen time and again.
Luckily for us, our community has professional traders and developers helping you by providing plug-and-play strategies like the spotGridAdvanced SGA Controller pre-built with a maximum of 12 trading pairs, thus preventing you from overtrading by default.
I will strongly advise you to abide by those principles at least until you get more experience. Remember “DIVERSIFY” doesn’t mean “Trade the Whole Exchange” 🙂
Technical Analysis Mistakes – Emotions Leading to Revenge Trading
When things are going well in trading, it is easy to stay calm and make informed decisions. However, when things start going south, you may enter into panic mode and do something called revenge trading.
Revenge trading refers to a form of trading in which you invest more money to recover the losses you have made. Such a hasty decision can lead to more losses because instead of thinking analytically, you are thinking emotionally, and emotion is not a good friend of crypto trading.
When you feel vulnerable, it is better to take a break and resume trading with a fresh mindset.
Well, this one is self-explanatory; no wonder we call it “Gunbot the Emotionless Crypto Trading Bot,” so, for real… Keep Calm and Gunbot.
Technical Analysis Mistakes – Stubborn Attitude
If you are a stubborn person, then crypto trading may not be for you. Because trading, in general, requires you to be adaptable to the market conditions.
There is no use in holding onto an asset just because it has given returns to you in the past or you believe in it. Also, there is no use in selling an asset just because you don’t believe in it.
The important thing is to think from the mind and not from the heart. Your motto should be “analyze, analyze and analyze.”
You always have to remember that you cannot apply the same calculations in different markets, and for every new asset you buy, your research and way of trading may vary.
So keeping an open mind is the key to succeed in volatile market conditions involved in crypto trading.
For this technical analysis mistake, my advice is: “Trade what you see, not what you believe.”
And again, Gunbot can help you here thank its integration with TradingView and your ability to add indicators and write lines interactively to your charts from the Gunbot GUI.
Here’s an example of some of the TradingView tools you can use in the Gunbot GUI
Technical Analysis Mistakes – Disregard Extreme Market Conditions
As a trader, you will always have to respect the market. You may know various types of technical analysis to predict the price movements of the assets. However, you will always have to remember that, after all…
The price changes are driven by demand and supply and not by your technical analysis tools.
For example, there is a conventional norm that when the value of the Relative Strength Index is above 70, then the asset is considered to be overbought.
However, it is not a direct indicator of the real picture of the market. It just shows that the buyers are dictating the terms of the market.
It would be best if you also did not buy or sell decisions even when RSI value is at extreme levels. They show who dominates the market.
A patient approach can do wonders for you, while others jump the gun only based on the RSI value.
When the market is going through extreme conditions, it is imperative to invest or divest smartly because, in such situations, the probability of losing money increases. The market becomes very tough to analyze in such situations.
So just blindly following technical analysis indicators, in this case, will do you no good.
What to do with Gunbot in an Extreme Market Condition?
Gunbot has awesome tools and features like “TRAILING,” which will be helpful in an up-trend, but Do Not try to chase a parabolic movement, especially a Pump, and apply the same principle when you’re trying to “Average Down.”
DCA is beneficial, but “If the Knife is Falling Hard, don’t Try to Catch It.”
Gunbot Trail-Me Feature Examples
Technical Analysis Mistakes – Over Relying on Technical Analysis
The indicators which help you do technical analysis only represent a probable picture of what might happen in the market. They provide no guarantee that the market will behave the way you analyze it using the technical analysis tools you got available.
When you develop your crypto trading strategies, you need to be flexible to look the other way round. No matter how experienced you are, you can’t claim that you have the market all figured out.
As a new trader, you’re learning more every day and eager to apply that knowledge to your trading, but keep in mind that one wrong step and you might overbuy or oversell, hurting your finances.
New Gunbot users make this TA mistake by adding too many indicators to their trading strategy, making it almost impossible for all those rules to be present simultaneously in the market.
Consider a simple strategy that you understand and uses a basic trading indicator that is reliable, do not overcomplicate your trading method.
Technical Analysis Mistakes – Mimicking the Trading Practices of other Traders
When you start trading, it is good to listen and follow some trading strategies to get a head start in your trading journey. However, market conditions are always changing, and there is a need to innovate.
If you follow different seasoned traders, then you will see that their trading methods differ. What may be a good trading strategy to one may not be that good to someone else.
You have to understand that every trader is trying to crack the code to predict market behavior; nobody succeeded in doing it.
Hence, you should know all the different trading methods, but you should apply only those which suit your trading style, personality, and the ones you understand the most.
You need to take into account the capital you have in your reserve and determine the extent to which you can take a risk.
The key is to remain flexible and evolve new methods, which are suited to your own idea. Then you can make yourself stand out in the market and make profits.
That is exactly the case of Gunbot, which comes with more than 15 pre-configured trading strategies.
Still, it also has a strategies marketplace with many add-ons by 3rd party developers, and believe me: they all work and are great, but…
Not all of them are made exactly to fit your trading style or meet your risk appetite.
Even more so, you will interact in our Gunthy Telegram Channels with other great traders that have fine-tuned their strategies, and some are really generous by sharing their settings, but again not all may fit your needs…
So, read, test, understand and make your adjustments, don’t Copy-Paste a strategy and give it your money to trade with.
Technical Analysis Mistakes – Falling Prey to Market Hype
It is important to remain updated with the latest news and rumors related to cryptocurrency. This will help you make informed decisions.
However, it does not mean that you will blindly follow news and predict market trends to make your buying and selling decisions.
There are often paid promoters who hype the return on investment on particular cryptocurrencies when they are looking to sell them. So, you will be investing in loss-making assets. Mostly, the new traders fall into this trap.
Before you decide what to buy and what to sell, do proper research from different sources.
Again, the Gunbot Community will help you there, and you won’t see FOMO or FUD spread in our Gunthy Telegram Channels; we are traders, so we don’t analyze those words because they’re not technical indicators 🙂
Here’s the crypto trading market structure you need to make sure you understand.
Technical Analysis Mistakes – No Clear Exit Strategy
As a new trader, you will often face a situation when you wonder about the right price to sell your assets. You may sell the assets late, expecting higher profit over time, or sell early by underestimating the asset’s potential.
It would help if you had clear analysis techniques to have the best idea when to exit the market.
Partial selling off profitable assets can fetch you instant profits, while you can risk the remaining assets expecting higher profits on them.
Gunbot supports you with that by allowing you to create a security risk management strategy, so make sure you define yours before you fire the bot, which can also include “trailing,” of course.
Tip: Always ask yourself the question. What I want Gunbot to do if? Describe the market condition (goes up, goes down) and apply the answer to your strategy.
Technical Analysis Mistakes – Buying too High or too Low.
Having a clear exit strategy depends a lot on your purchase strategy.
If you are a new trader, you might make the common mistake of buying a widely popular asset at a high price just because you don’t want to miss out on the opportunity.
Similarly, you might overestimate an asset’s growth potential by buying very cheap and expecting to sell them at high profits.
It is important that you analytically take decisions and not just blindly follow some signals to buy or sell. You have to realize that every asset has a point where it will grow no further. So, being too greedy may cost you dearly.
Enter Gunbot Autoconfig; this performance tool can scan the exchange and give you the data of almost every condition you will need; let me give you an example to keep it simple…
Autoconfig can add pairs with volumes Higher than 100 BTC on your chosen exchange, thus eliminating even the remote possibility for you to trade low-volume pairs.
But not only that, it can “Remove” those pairs from your strategy if their volume drops. Ain’t that cool? And those are two of the most simple tasks autoconfig can perform.
So, you’ve been reading, seeing Gunbot mentioned, and chances are you already know about Automated Crypto Trading Bots. Still, please allow me to explain a bit more about what exactly is trading with a bot.
I promise to keep it short and simple… 🙂
What is Automated Crypto Trading?
Automated crypto trading is a form of trading where reliable software buys and sells cryptocurrencies based on specific technical analysis indicators, price changes, and the amount of capital you possess.
There are different types of bots that help you in trading seamlessly with proper technical analysis and timing.
Why Choose Automated Crypto Trading Bots
Automated crypto trading bots make cryptocurrency trading easier. Period.
By now, you have understood how emotions can ruin your decision-making when it comes to crypto trading. There is no place for favoritism, attachments, ego, or breaking down.
All your trading decisions need to be taken with an analytical mindset. So, these bots offer you emotionless trading based purely on data and analysis.
Also, you need to invest a lot of time to keep track of market trends for trading. If you can’t commit that much time, then crypto trading bots are the perfect fit for you as they buy and sell cryptocurrencies for you at the right time and based on analytical data.
With different types of cryptocurrencies cropping up in the market, it isn’t easy to keep track of them. So, if you want to explore different opportunities market-wide, then such bots can help you manage all the exchanges in one place.
On the bright side, these bots charge “NO Fees” for the trades, unlike exchanges that take a significant bite of the apple.
If you are looking for an affordable, efficient automated crypto trading bot, you should consider joining Gunbot.
Why Choose GUNBOT
Gunbot is an automated crypto trading bot that helps you stay away from all the complex technical analysis strategies and do the trading automatically for you. This involves trading a wide variety of cryptocurrencies on many available exchanges.
One of its best features is that, unlike some other automated crypto trading bots that are cloud-based, Gunbot is simply software that you can install on your personal computer and run on your system.
This gives you extra protection so that your data is not stored and misused.
Gunbot runs on the major operating systems, giving you the flexibility to install it, no matter what type of desktop or server you have.
It is perfect for traders who are just starting their trading journey. The bot has popular trading strategies which will enable efficient buying and selling of cryptocurrencies.
Gunbot offers a Lifetime License for users at an affordable price; it also allows you to devise your own trading strategies and use them to influence the bot’s decision-making process.
The community of Gunbot is also huge. Many traders share their experiences and new trading strategies with others. So, you can get some useful insights and enhance your creativity through such discussions.
Gunbot is known for its prompt support and customer service. With a newly dedicated support program, it is evident that customer service is a top priority for Gunthy LTD.
It offers different packages with different prices that enable you to pick a plan based on your level of expertise and requirements. So for every customer, Gunbot is highly customizable.
Gunbot also has a responsive and fast interface so that you can check your trading performance hassle-free. Also, it allows you to access it through mobile devices.
So, as you can understand, Gunbot offers privacy, flexibility of use, affordable price, variety of choices in trading methods and cryptocurrencies, and excellent customer service.
You can say Gunbot has an all-in-one package.
Technical Analysis Mistakes – Closing Thoughts
Since we are human beings, no matter how much we try, we get dominated by our emotions and make rash decisions.
Crypto trading is in such a volatile market that either we can go big or go home.
No strategy is perfect. But with the use of algo-trading technology, we can at least hope to get close to perfect.
Automated crypto trading bots are the way of trading for the future.
GUNBOT leaves its mark as a user-friendly, efficient, and profitable crypto trading bot among all the stalwarts in this category. Grab your Gunbot Copy Now, and I see you on the inside!