Getting started with technical analysis
Understand what technical analysis is, what the app computes for you, and how to read the analysis panel.
The essentials
Technical analysis studies the historical price and volume of an asset to try to identify trends, potential turning points, or moments that may be favorable for buying or selling. Unlike fundamental analysis, it does not look at the intrinsic value of a project; it only looks at how the market has been behaving as read from a chart.
This application automates that reading for you. It continuously computes five well-known technical indicators for every tracked asset: the RSI (Relative Strength Index), the MACD (Moving Average Convergence Divergence), the EMA50 and EMA200 exponential moving averages, the position of the price relative to the EMA50, and the Bollinger Bands via the %B indicator.
- RSI: measures the speed and size of recent price changes, to spot oversold or overbought conditions.
- MACD: compares two moving averages to gauge momentum and trend direction.
- EMA50 / EMA200: two exponential moving averages that show the underlying trend, short term and long term.
- Price vs EMA50: shows whether the current price is trading above or below its recent average.
- Bollinger Bands (%B): locates the price relative to its recent volatility, to spot extremes.
Each of these five signals is then combined into a single confluence score, ranging from minus 100 (strongly bearish) to plus 100 (strongly bullish). This score summarizes at a glance whether the indicators broadly agree or contradict one another. In addition, the app produces automatically generated verdicts based on fixed rules, which translate these numbers into readable sentences.
The analysis panel shows three layers of information. At the top, the overall confluence score, with its color and label (for example bullish, neutral, or bearish). Below it, a bulleted list detailing, for each indicator, its current value and its individual interpretation. Finally, one or more verdict cards that restate the situation in a summary sentence, sometimes accompanied by a confidence level, a time horizon, or support and resistance levels.
Going further: the strength of confluence
No single indicator, taken alone, is reliable at all times. The RSI can stay oversold through a prolonged decline, the MACD can produce false crossovers in a trendless market, and price can bounce off a Bollinger Band before decisively breaking through it a few days later.
The idea behind confluence is to never rely on a single signal, but instead to check whether several indicators, built on different logic, agree with each other. When the RSI, the MACD, and the moving-average trend all point in the same direction, the overall signal is statistically more robust than when only one indicator sits at an extreme while the others remain neutral or contrary.
This is exactly what the app's confluence score does: it aggregates the five signals to give you an overall picture, rather than leaving you to interpret each indicator in isolation.
Expert: limits of technical analysis and psychological biases
Technical analysis rests on the assumption that past price movements carry useful information about future ones. This assumption is debated and works unevenly across markets, time periods, and asset liquidity. In cryptocurrencies especially, volatility, sudden regulatory announcements, or large wallet movements can invalidate an otherwise coherent technical signal within minutes.
Beyond the limits inherent to the indicators themselves, it is often our own biases that distort interpretation. Confirmation bias pushes us to notice only the signals that confirm an opinion we already hold, while downplaying those that contradict it. FOMO, the fear of missing out, pushes traders to enter a position after a large move has already largely played out, often at the worst point in the cycle. Being aware of these biases does not eliminate them, but it helps recognize them at the moment they are influencing a decision.
- Confirmation bias: seeking out only the signals that support a desired outcome.
- FOMO: acting in haste for fear of missing a move that has already largely happened.
- Overconfidence after a winning streak: taking on growing risk while believing you have found a foolproof method.