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The Most Common Mistakes That Are Made With Technical Analysis

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Have you recently begun to employ technical analysis in your trading? The idea is a slick way to reduce risks while increasing revenues. However, while it is advantageous, it may also be disastrous if misused.

Technical analysis (TA) is a popular method of analyzing financial markets. TA can be used on almost any financial market, including stocks, FX, gold, and cryptocurrencies.

While the fundamental concepts of technical analysis are simple to grasp, mastering them is a difficult task. When learning a new ability, it is only natural to make many mistakes along the way. When it comes to trading or investing, this can be very dangerous. You risk losing a significant percentage of your wealth if you are not cautious and learn from your mistakes. It is fantastic to learn from your mistakes, but it is even better to use Trade360’s brokerage services and reduce your mistakes.

This article will walk you through some of the most typical technical analysis mistakes.

Common Mistakes We Make in Technical Analysis

Technical analysis is a skill that takes time to learn. Learning the fundamentals of trade analysis is critical for novices. Although certain faults are unavoidable, frequent errors must be avoided to profit. Here is a rundown of the most typical blunders made by traders:

1. Forgetting to Cut Your Losses

Although it may appear to be a little step, it is always prudent to underline its significance. When it comes to trading, your top goal should be to protect your money. Getting started with trading can be challenging. This is a fact that many investors overlook, and as a result, they begin to lose money.

Traders frequently do not adopt this mindset, which leads to poor long-term success. Even a single bad trade can have a detrimental effect on your portfolio. Especially when trading crypto products with leverage, you can lose a lot of money rapidly if you are not careful. As a result, it is recommended that you start with lesser position sizes or avoid risking real money altogether. There are websites where you may test your strategies without having to spend any money.

2. Overtrading

It is common for investors to believe that they must always trade. Because cryptocurrency trading takes extensive research and patience, it is advised that you do not trade for the sake of trading. Some traders make less than a dozen trades every year and yet make a lot of money.

3. Using Shorter Time Frames

Investing is frequently done in short time intervals. Selecting short time frames, like overtrading, will reduce your profits. Higher time frames will provide you with consistent readings whether you utilize an indicator or follow a chart trend.

When employing an indicator, selecting higher time frames will offer you more precise signals, and chart patterns visible on higher time frames are more dependable. One should also attempt to avoid revenge trading wherever possible. When an investor invests right after a loss to recoup their losses, this is known as revenge trading. You should never allow your emotions to guide your trading selections.

4. Not Being Flexible

Trading in cryptocurrencies is not always reliable. In some markets, a strategy that works well in one market may not work well in another. Many traders mistake treating support and resistance as specific locations rather than generic buying and selling zones. You must be adaptable if you want to be a good bitcoin trader.

You should know where to draw the line and stick to it. However, as the price starts to interact with them, you should remember to remain adaptable. Furthermore, while cryptocurrency investment should never be overly reliant on a single coin, no coin is guaranteed to rise in value indefinitely.

5. Ignoring Extreme Market Conditions

The TA’s forecasting abilities can become unreliable at times. Such events, which are fueled by emotion and mass psychology, may occur because of black swan events or other severe market conditions. Like all other markets, cryptocurrency markets are eventually governed by supply and demand, and there may be moments when market forces are significantly skewed on one side.

Making judgments exclusively based on technical indicators can lead to losses, especially during black swan situations, when market behavior can be challenging to interpret. Therefore, one must constantly consider additional circumstances.

6. TA Is a Game of Probabilities

Keep in mind that technical analysis is based on probabilities rather than absolutes. To put it another way, no matter how successful your plan appears to be, there is no assurance that the market will satisfy your expectations. Especially when trading cryptocurrencies, which have significantly higher volatility and uncertainty than other assets.

It is recommended that you never presume that the market will follow your analysis, no matter how skilled you are. As a result, you should always think about the various possibilities. Prepare for the worst-case scenario.

7. Forcing a Setup

It may be difficult for you to recognize trades as a novice. Beginners frequently open a chart on a coin in the hopes of finding a trade, but they are unsuccessful. It is acceptable for a rookie to lose out on certain opportunities, but forcing a transaction is never a good idea.

You will not need to compel one if the technical setup is excellent. Do not invest if you cannot locate a trade that is right for you.

Trading is not simple. It takes a lot of time and practice to become reliably excellent at something. You must refine trade techniques regularly, and you must learn how to generate trading ideas. Of course, whether you are a novice or a seasoned trader, you should always keep your crypto trading account secure.


Every trader who employs TA has made at least one of these mistakes. Being aware of these blunders in technical analysis is one of the greatest methods to prevent them. Using automation in all your trading systems is another suitable method to avoid them. Automated TAs will assist you in maximizing earnings, reducing unsafe manual operations, and ensuring your safety.

About the author


Bipasha Chakma