Does TA (Technical Analysis) Work?

in LeoFinance3 years ago (edited)

Technical Analysis

It's been a while I wrote a financial post. I was checking my Leofinance feed earlier and realized that last I wrote anything remotely financial was more than 2 months back. That is quite strange when I look back, as there was a time, not too long ago, that I would write mostly financial, chart and trading related stuff. It is not that I have stopped trading (well lately I call myself an occasional trader), and also it is not that I do not like trading or find financial stuff less appealing. It is to the contrary. Rather, a lot of the discussion happens off chain in various discord servers (which I enjoy as much as the on-chain conversation). One conversation triggered this post:


Wide-Eyed Neo-Trader: and it is now proven beyond a shadow of doubt bhai, even if it is an artficial pump, TA works.. no doubt

Seasoned Cynical Doubter: i do not agree

Wide-Eyed Neo-Trader: TA works sensei, that dude named Baba Fat showed it to me 5 mins before the pump!

Seasoned Cynical Doubter: a pump was eminent we all knew, don't need TA for it. I even had orders set for it before i have gone to sleep! But yeah I never thought $1 was possible. I had orders at 8490.

Eternal Questionaire: what is TA?


No, it is no vodoo, and no, its not magic, and yes, there are millions of articles, books, webpages, YouTube videos written on Technical Analysis (most of it crap!), so why I want to write something more and add to the pile of crap? Because I can! It's my blog! LOL. Nah, that's not it! Couple of communities I am posting this, a few individuals asked me from time-to-time and I just thought we will have some fun together.

What are they talking about?

Well the recent "PUMP" of hive off course! I hate that word pump, I will just call it rally in this post, which is the traditional word in financial market and it means rise of price.

image.png

Daily Chart of Hive since its inception

Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.

Above is the accepted definition of TA. This is one of the branches of analysis to 'price' a security, the other being 'fundamental analysis' which is mostly relevant for stocks and companies where one tries to find a fair value of a 'business' based on its balance sheets. Both technical and fundamental analysis are accepted form of financial analysis by SEC (Securities and Exchange Commission) in the United States, and similar governing bodies internationally. Whether they 'work' or not, is the question I am willing to address. But the first point is to establish that they both exists!

That chart above is for Hive. We all know that it is a token and not a centralized company. As a stakeholders it is ours. It is a decentralized currency and without any government control. We all know that very well, but the reason I say this is still there are people here, some quite experienced, who doesn't know what some of these means. So, I urge folks to research on decentralization and this article is not about that.

Just because Hive is not a corporation (?) it is difficult to assign any value to it. Therefore, hive as a whole doesn't have a balance sheet (not for all activities anyways). Without that it is very difficult to value various businesses and individual entities that constitute hive. Therefore, it is nearly impossible to apply fundamental analysis to hive or any cryptocurrencies for the matter (also most of them are NOT securities, at least I think they don't want to be!).

So with fundamental analysis out, we are just left with Technical Analysis. This is the only tool we have, to do any kind of price analysis for a token like Hive (yeah sure, we can study the market cap and other accepted tokenomics show in crypto)

image.png

Hive was hard-forked from steem in March 2020. Pandemic was just starting, and whole world was just beginning to lock down and working from home became a norm and not an anomoly or a perk. I think many of us who were already entrained on this ecosystem were immensely benefitted from not just from the earning, but just to connect with people, without the irritation of concentional social media like facebook. So I am immensely thankful to the ecosystem.

With that out of the way, let me say this simply, and it is coming from a person who is looking at charts most of his adult life, that daily chart is not good looking :) Yeah, its our kid, we love her, but she is not the best looking one. Nothing wrong with that, it is what it is!

$1 is a psychological level for any crypto, (let us not talk about supply and marketcap and outstanding token etc, we all know that, and if not you can research). Point is we have rarely visited that level. So, whenever we go there, and we have been there only 3 times for minutes, within the last 17 months; people get very excited, and rightly so.

Can TA predict price?

For a single trade? NO. That is the short answer and it is a fact.

What it can do though, is discuss a probility of a particular price action to happen by using a large number of trades. Based on that it typically show a directional bias based on herd mentality. That is all TA can do. So TA can predict price in future with say 60% certainty, if certain assumptions are met over a 'large' number of trades. That 60% is an arbitrary number, it can be 55 or 65, but as long as it is higher than 50%, the user, YOU, have an edge. Actually I can prove that even below 50%, with trading discipline, one can come out profitable by using TA over a large number of trade consistently.

Is it easy to practice in action? NO.

Is it easy to show and teach? YES!! :)

Are there many people out there who is willing to teach you? Hell YES! For a small fee! Or a subscription service!

My blog isn't one :) As I am no Baba Fat!

https://allpoetry.com/the-perfect-high

Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have.

Charts are created in Tradingview.com, which is a free service.

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It’s hard to go from binging Ghibli to writing financial posts 🙈. It’s a nice balance though.

My understanding of TA is that these are likely patterns that play out either because of human psychology or because of bot programming. News and fundamentals always have the potential to override the patterns but they do play out far more often than chance. For hive I’m always watching how many whales and orcas we have. The more people powering up, the less selling pressure we will have. This doesn’t seem to be the best indicator though as a lot of our price is determined by pump and dumpers since we haven’t reached a critical mass of users yet.

Oh! I can do that all the time :) going to Ponyo to VWAP;)

List of “whales” on hive is easy to look up at various places… the one I use is this one

https://hivebuzz.me/ranking

Just sort by HP. You will see me at #20.

I wish the theory is that simple :)

Price of hive, in the short term, depends on buying pressure from the upbit exchange. That is where usually the largest volume of hive is traded. That hive is never powered up and remains liquid.

Thanks for reading.

Did you get around to Kaguya Princess? And while I’m at it, it’s not Ghibli but Made in Abyss does for me what Ghibli does for most people. My hands down number one anime recommendation. The character design turned me off at first but it’s incredible!!

I haven’t yet, but I will!

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Hive isn't Decentralised, it's far from it but yes we all own shares in it.

I think that this rally is a good one and it seems to be sticking around alot longer. With the recent Splinterlands and more games being build on Hive I think we should start getting used to this price point more often.

Anyone's guess if it will hold but it is beautiful none the less.

Interesting thing.

It is resistance and support.

Break 1$ means new ATH sooner or later.

Hive has value like BTC, not a single entity can fuck around :D

IMO hive will do a ETH move as soon the major issues are fixed. Social and finance is such a powerful instrument. Think about in combination with smart contracts and wrapped tokens + high liquidity dexes :)

An onchain HBD/Hive pool would be a nice start for that foundation. The 10% APR move there, bam.

It would work like a centralized token with all benefits of decentralization. Sure haircut and stability are things that only time will tell it works out.

But with some technical adjustments, i think it could work out.

Defi protocols could build on L2 on top of that.

Would it be this unrealistic to see an 100x move from here? Splinterlands show us what a working Dapp can do :) 10 of them + 2 good working social apps, bam :D.

maybe not 100x, but an solid foundation. Thats my 2 cents to that :P

Lots of these things are already in place. Lets see how things evolve.

If staying above a $1.00 ever becomes the HIVE norm, my families lives would be changed forever. I didn't have any liquid HIVE to sell during this "pump," still focused on building up my HP before I could ever sustainably power down and use a little HIVE here and there.

For now I'd be quite happy to see HIVE settle above 50 or 60 cents, fingers crossed.