Crypto Trading Basics: TA vs FA — Step-by-Step Guide & Transcript

[00:00] So you want to learn how to trade cryptocurrency, have an easy life and make fast money.

[00:16] Well, there is no denying that some people in the world are doing that. But it's important to understand that that is a bad mindset to approach learning crypto

[00:28] trading. combined by far too ambitious goals is a big part to why many rookie traders end up failing. If you take one thing from this video, you need to remember that trading carries a lot of risk.

[00:42] If you want to trade crypto, it's essential to have a general understanding of trading so that you don't end up making impulsive decisions and trade based on emotions. Understanding trading will also help you quantify the risks and give you a better idea of when to

[00:58] make a trade by continually monitoring and optimizing your crypto trading strategy. Stick around to the end of this video and find out how one viewer can stand a chance to win 100 CUSD.

[01:10] Before you start your crypto trading journey, it's essential to have an understanding of two main methods that can be used when building a trading strategy. In this video, we'll be looking at two main concepts, technical analysis and fundamental analysis. Technical analysis is

[01:26] referred to as charting. This type of analysis aims to predict future market behavior based on previous price actions and volume data. Technical analysis is strictly focused on historical price

[01:39] action. It's used to examine asset price fluctuations and volume data. Traders use technical analysis in an attempt to identify trends and favorable trading opportunities.

[01:51] It's like pattern recognition. The best technical analysts have seen countless scenarios play out multiple times. So when a familiar situation starts appearing on a chart, analysts feel confident that they know what's going to happen next.

[02:05] Technical analysis is basically the study of an asset's current and previous price. The main thought behind technical analysis is the fluctuations in the price are not random and that they evolve into trends over time At the core technical analysis is the analysis of supply and demand which are represented by the overall market sentiment In other words the price of an asset

[02:29] is a reflection of the opposing selling and buying forces. These forces are closely related to the emotions of traders, like traders who sell due to fear or buy in the hope of gaining more.

[02:42] Technical analysis is quite polarizing. Some people swear by it and others think it's complete nonsense. One way you can think about it is in terms of psychology. Basically, in technical analysis, traders will sometimes have a high confidence in the upcoming market news

[02:58] due to patterns in the current data. These traders are not trying to predict the future. They're predicting what's going to happen in the market by taking a look at the data in front of them. For example, traders might know when a chart looks a certain way that the majority of the

[03:14] market will feel fear and start selling, so that they can deduce from that how they should trade. It's not about using magic to predict the future. It's about understanding market psychology and what the average person is going to think

[03:29] based on the market conditions and then positioning accordingly. To spot favorable opportunities, traders often use indicators. Technical analysis indicators help traders identify existing trends and provide insightful

[03:43] information into trends that may emerge. The first indicator that we'll be looking at is moving averages. Moving averages is one of the most commonly used tools to indicate overall trend direction, to determine support and resistance levels.

[03:57] Moving averages is calculated based on the closing price of an asset within a specific time period. For example, the closing price of BTC yesterday. 20 MA, one would look over a 20-day period, where 200 MA, one would look over a 200-day period.

[04:14] By calculating MA, the impact of random short-term fluctuations on the price over a specific time period is reduced. We will look at what MA looks like on a chart later in this video.

[04:26] Next up, RSI, Relative Strength Index. RSI measures the extent of recent price changes to evaluate overbought and oversold conditions.

[04:38] It used to study the perceived strength of the market If you want to learn how RSI is calculated there be a link in the description so you can take a look But for now all you need to know is how and why traders use this indicator

[04:51] The great thing is you don't need to learn the formula to calculate an RSI because that's already built into the Binance chart for you. If you want to explore RSI more in depth, follow these steps. Go to your chosen Binance chart.

[05:04] In this case, we are looking at the BTC-BUSD trading chart. Go to TradingView, Indicators, RSI, click on Relative Strength Index. Now you can see what it looks like on the chart.

[05:16] The next indicator we'll be talking about is Bollinger Bands. It's called Bollinger Bands because John Bollinger created it. Bollinger Bands indicate whether the market has high or low volatility, as well as overbought and oversold conditions.

[05:30] Simply put, it breaks down to a moving average, which we've spoken about before in this video, and volatility bands. When traders add this indicator to a chart, they'll have the moving average in the middle and a Bollinger Band at the top and the bottom.

[05:45] This indicator is designed to ensure that 95% of the price data will fall between these two trading bands. Bollinger Bands are based on price volatility, so they won't stay the same distance from the moving average.

[05:59] If volatility drops, they'll get closer to the moving average. If volatility gets bigger, they'll widen. Let's take a look at the Binance chart. Right now, all we can see on the chart are trading candles.

[06:12] By clicking on indicators and then selecting moving average, you can see there is an extra line in the chart that wasn't there before. This line is the moving average. When we go back to the indicator, we click on Bollinger Bands.

[06:25] We see that the chart now has two extra lines at the top and the bottom of the moving average. Some traders believe that when the Bollinger Bands are far apart, the current trend might

[06:37] be ending, and when the bands are narrow, the market volatility is low. Now that we've taken a look at technical indicators, we're going to take a look at the next popular concept that traders like to use to build a trading strategy.

[06:50] The goal of fundamental analysis is to determine if the price of an asset is overvalued or undervalued. Fundamental analysis is also known as F.A. SA assists in asset value by examining as many qualitative and quantitative factors as possible such as market cap and other economic factors FFA works on the understanding that the potential of an asset

[07:14] should be based on more than just previous performance. In traditional stocks in the finance world, traders use FFA to find projects that they believe will have high potential. By looking at balance sheets, results, the product,

[07:29] and everything that is connected to that project. In crypto, a DeFi project could be generating a lot of revenue and benefits for holders. But not many people know about it yet. Traders would use FA to seek out these kind of projects.

[07:43] You could say that FA looks to determine how external factors can affect the performance of an asset. FA considers more qualitative data than quantitative data.

[07:55] An example of this would be looking at Ethereum through FA. Investors would look at everything connected to Ethereum rather than just how the asset itself has been performing in the past. What are the basic differences between TA and FA?

[08:09] FA looks at the largest picture of an asset considering as many influencing factors as possible. TA is strictly focused on historical, market data, and market charts. FA seeks to determine the actual value of a trading asset.

[08:24] TA is used as a tool to predict the price action based on trading volume and past trading. SA and TA are both very valuable in their own way, but the most reasonable course of action would be a balanced use of both.

[08:39] In the next video, we'll be covering trading strategies. Now that you have a basic understanding of the two main concepts of crypto trading, you are ready to learn about trading strategies. As promised at the start of this video, one viewer will stand a chance to win 100 BUSD.

[08:54] To enter the giveaway, subscribe to the channel and leave a suggestion in the comments on what video you would like to see on the Binance YouTube channel. Our team will choose the best suggestion and that user will win 100 BUSD. The winner will be notified by a reply to their

[09:11] comments and you can see all the details of the giveaway in the pinned comment under this video. The giveaway will run for two weeks from this video's post date. We are looking forward to hearing your suggestions and seeing you in the next video.