How to Use Technical Analysis When Trading Crypto

Using Technical Analysis and Price Action to Plan Your Crypto Trades

In the previous lesson, you learned how to use fundamental analysis to better understand specific cryptocurrencies, form a directional bias (bullish or bearish), and decide whether an asset looks like a potential trade idea—to either go long (buy) or short (sell).

Now that you’ve formed a directional bias using fundamental analysis, it’s time to identify your entry and exit prices—when to get in and when to get out of a trade.

This is where technical analysis (TA) and price action (PA) come into play, especially if you’re trading using a discretionary approach—where you rely on your own judgment rather than automated systems.

What Is Market Price and Why Does It Keep Changing?

Before diving into how TA and PA work, let’s first understand what market price actually is.

Market price is simply the agreed-upon value between a buyer and a seller at any given moment.

Imagine you’re at a farmers’ market. A vendor lists a bag of apples for $1. If someone agrees and pays $1, then that becomes the market price. If nobody buys, the seller might drop the price to $0.95 to attract buyers. If demand increases and the apples sell out quickly, the price might go up to $1.10.

Financial markets operate the same way, just at a much larger and faster scale. Instead of a few people at a stall, thousands of buyers and sellers are constantly trading based on different opinions, strategies, and motivations. That’s why market prices fluctuate every second—because the balance of supply and demand is always changing.

You can’t know exactly why every trader is buying or selling. Some base decisions on news, charts, algorithms—or even rumors. The best we can say is that price reflects all currently known information and the collective market sentiment at the time.

So, What Is Price Action and Technical Analysis?

Price action and technical analysis are tools traders use to analyze historical price movements to interpret current market sentiment and anticipate possible future moves.

By studying charts and indicators, traders can figure out whether the market is generally bullish, bearish, or neutral—and where a shift in sentiment might occur.

Example: Bitcoin Technical Analysis

Let’s take a look at a BTC/USD chart on the 4-hour timeframe.

During November, price fell from around $70,000 to $54,000, indicating a bearish market sentiment.

Key price levels like $58,000 and $60,000 stood out:

• In October, they acted as support (buyers stepped in).
• In November, after those levels broke, they turned into resistance (sellers stepped in).

This suggests that if price climbs back up to those levels, they could again attract selling pressure—unless price breaks above, which might attract new buying interest.

At the bottom of the chart, we also see the MACD, a popular technical indicator. In this case, MACD shows that recent upward momentum might be fading—another clue that sellers could return.

So, if your fundamental analysis already suggests weakness in BTC/USD, then this TA aligns with that idea, reinforcing your bearish bias.

If That Felt Overwhelming, Don’t Worry!

If you’re not yet familiar with tools like MACD, that’s okay. You can explore beginner guides to indicators in our Technical Analysis lessons at the School of Pipsology.

Before you dive in, here are a few helpful tips:

Quick Tips on Using TA and Price Action Effectively

1. Don’t overcomplicate it.
   Using too many indicators can lead to analysis paralysis, where conflicting signals confuse your decision-making.
2. Stick to a few tools.
   Choose 2–3 indicators or chart techniques that make sense to you and focus on mastering them.
3. Avoid redundancy.
   Many indicators use the same types of data (like price or volume). Using too many similar ones (called multicollinearity) can clutter your analysis without adding new insights.
4. Don’t rely on TA alone.
   Technical analysis looks backward—it shows what has happened, not what’s coming. It doesn’t reveal upcoming news, catalysts, or changes in market sentiment.

Final Thoughts

As a beginner, the best approach is to use fundamental analysis to generate trade ideas—then apply technical analysis and price action to fine-tune your entries and exits.

With practice, you’ll get better at spotting key price levels and patterns that align with your broader trading thesis.