Welcome to the Crypto Jargon series where I break down the most commonly used crypto-related terms, acronyms and trading slang.
Today I am going to explain the terms :
- Technical Analysis
- Fundamental Analysis
- Sentimental Analysis
- Quantitative and Qualitative Analysis
These are all types of market analysis used by traders to predict prices and they work best when combined, so let’s first take a look at TA – Technical Analysis.
Technical analysts focus on patterns of price movements, trading indicators and various analytical charting tools to evaluate the performance of an asset or stock or cryptocurrency of course.
Technical analysis, as we know it today, was first introduced by Charles Dow in the Dow Theory in the late 1800s.
Since then it has evolved to include hundreds of patterns and signals developed through many years of research. Technical analysts believe that past trading activity and price changes of any asset can be valuable indicators of its future price movements.
Contrary to TA, FA – Fundamental Analysis – attempts to measure the intrinsic value of an asset or cryptocurrency by examining related economic and financial factors, which can be both qualitative and quantitative in nature.
Fundamental analysts study anything that can affect the value, including macro-economic factors (e.g., economy and industry conditions) and micro-economic factors (e.g. financial conditions and company management, use cases, software or protocol upgrades, new releases, exchange listings, community growth, even public opinion and more).
The end goal of fundamental analysis is to produce a quantitative value that an investor can compare with the digital asset’s current price, thus indicating whether the asset is undervalued or overvalued.
Qualitative analysis uses subjective judgment based on non-quantifiable information, such as management expertise, industry cycles, strength of research and development and labor relations.
Qualitative analysis contrasts with Quantitative analysis, which focuses on numbers found in reports such as balance sheets. The two techniques, however, will often be used together to examine a company’s operations and evaluate its potential as an investment opportunity.
Sentimental Analysis is the more subjective form of forming an overall picture of the public perception, or sentiment about a project/company or cryptocurrency, through analysing the engagement and interaction on social media, forums, public events and other online and offline data which helps put in perspective how well or how poorly the asset/project/company performs in the public eye. It can be part of Fundamental Analysis but on its own it is not the best form of determining real value.
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There are many books that can give you a deeper and detailed breakdown on Technical analysis and how to use it to read the charts and predict possible price of your investments. Here are a few that I can recommend.
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