Hello, community! Investing is a complex process that requires more than just money. The success of any deposit depends entirely on how the investor reacts to various challenges — and even their ability to foresee the future. That’s where traditional technical analysis is supposed to help. But is it really that simple? Let’s break it down in today’s article.
Also, just a quick reminder — we’re enthusiasts creating content for other enthusiasts. So we’ll explain everything in simple, clear terms. And if we’re lucky — it might even be fun!
If you still don’t know how cryptocurrency prices are formed, be sure to check out our deep dive. It’ll teach you something useful about the crypto world!
What Is Technical Analysis?
Technical analysis is a method of forecasting market trends by analyzing charts, spotting recurring patterns, or identifying anomalies.
There’s a whole list of chart patterns that, according to technical analysis, are supposed to signal where the price might go. This applies to any market — stock, exchange, or crypto.
Here’s how it works:
- Price candles are analyzed over a selected timeframe;
- Trendlines are drawn from low to high points;
- The trader looks for historical patterns to predict future price movement.
According to the theory, if you can identify a pattern — you’ll know whether the coin will rise or fall. And there are tons of these patterns: flags, triangles, cups, and so on.
While they may look like simple doodles traders make for themselves, they’re based on volume, trends, and common behaviors — all of which can repeat over time. That’s why they’re considered potential indicators of market behavior.
And nowadays, you don’t even have to know how to do it. Even ChatGPT can run a full technical analysis for you:
AI will factor in not just candles but all visible lines on the screen. So if you trust technical analysis, you can be confident that AI will do it just as well — or even better.
Does Technical Analysis Work in Practice?
Let’s look at the example below. The chart forms a “double top” — two peaks with a dip in between. This pattern typically signals a downward trend, potentially even a crash. But what follows looks more like a normal correction. So, is it a misread, or is technical analysis a scam?
Truth is, the heyday of technical analysis as a reliable forecasting tool is probably long gone.
Still, even in crypto — a relatively young trading space — people continue using it to make predictions. But how often are those predictions accurate? Probably not very, if we’re still debating its effectiveness today.
More importantly, applying technical analysis to crypto is especially difficult because of its extreme volatility. Some even link the “death” of technical analysis to the launch of futures contracts on stock indexes in Chicago, which massively increased volatility overall.
Even if we assume technical analysis works, it’s not useful for long-term strategies. For instance, would analyzing charts in 2013 have mattered if you just bought Bitcoin and held it until 2025? You’d still be massively in profit, regardless of what the chart showed back then.
Also, let’s not forget the basics: markets are driven by supply and demand — and ultimately by people. And people are influenced by external events: wars, pandemics, natural disasters, economic crises, sudden tariffs. None of these can be predicted with technical analysis.
And that’s the core issue. Technical analysis made sense back when information was scarce. It didn’t fix the lack of data, but it helped forecast short-term movements. Today, in the age of instant news, global events shape market reactions — and you need more than just charts to make smart calls.
Should You Stop Using Technical Analysis?
There are still situations where technical analysis makes sense. Mainly, it helps you spot entry points — when a coin is likely at its local bottom, making it a good time to buy. But it should only be used in combination with fundamental analysis.
The same goes for selling — technical analysis can help you find an optimal exit point. And yes, AI can help with this too.
Conclusion
Can you trust technical analysis? That’s up to you. In our view, it’s a flawed forecasting method that ignores too many variables. But it’s still usable — in specific scenarios, which we’ve covered.
The most important tool for any investor is information. And you can find plenty of it on our CryptoGeek Telegram channel, where we post fresh and relevant crypto news!
As always, respectfully yours — your Geek!
Can You Trust Technical Analysis? — FAQs
Technical analysis is a method of forecasting market trends by analyzing charts and identifying patterns or anomalies.
It’s often used to forecast asset price movements. However, in today’s world, it’s mostly helpful for short-term decisions — like spotting market entry or exit points.