Things To Know Before Trading With Technical Indicators
As you know, technical indicators can be used to analyze different securities such as commodities, forex, stocks, and of course, cryptocurrency. Including indicators in your strategy can help you decide if you want to make the trade you have in mind. In fast-moving markets such as cryptocurrencies, it is crucial to identify signals or trends because timing is key.
Still, there are few things you must know!
The 5 Best Indicators For Cryptocurrency Trading
Cryptocurrency prices can seem random and chaotic. Some days they go up 10-20%, some days they dump 5-10%. This is why the most successful crypto traders and investors use technical indicators. The best indicators for cryptocurrency trading help make sense of price action, and help you predict where the price will likely head in the future.
In this article we will talk about my favorite indicators I use on a daily basis to day trade and swing trade cryptocurrencies. Before we talk about what indicators I use, lets start by defining them, and how they are generally used in the trading world:
Moving Average Convergence Divergence
The moving average convergence divergence indicator, also called the MACD, is considered a lagging indicator and therefore is best used to confirm trends changes in price action with a crossover.
On weekly timeframes, the MACD has turned bearish in Bitcoin, signaling that momentum has turned downward for the time being. The MACD is still well in bull territory, so theres not necessarily a reason to fear at the moment.
The severity of the crash increased once BTC fell below the zero line on daily timeframes, signaling the correction would deepen. If the weekly MACD does the same, things could turn extremely bearish for crypto as a whole.
Traders will want to watch for the daily MACD crossing back upward bullish before considering the bull trend back on. A weekly crossover toward bullish would further confirm the uptrend but considering that the indicator is indeed laggy, waiting for the weekly could lead to missing out on the rest of the bull market.
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Most Used Indicators For Trading Cryptocurrencies
Technical indicators help to understand the best points of buy and sell, bringing peace of mind to trading
Technical indicators are one of the most used resources in the interpretation of a given market. They are useful for the trader in many assets: They are traditionally used for the stock market, futures, Forex etc. and also for the cryptocurrency market.
The reason is simple: Technical indicators help to understand the best points of purchase and sale, bringing peace of mind to trading. But know that there are indicators preferred by professional traders! In this article, we bring you the 5 most used indicators for trading cryptocurrencies! Keep reading below.
What Is An Ichimoku Cloud
An Ichimoku Cloud is an indicator used to measure support and resistance levels and other relevant data, including trading momentum. The Ichimoku cloud chart contains so much information that with just a glance, you can decipher a lot. But attaining this level of understanding is not easy as the charts may seem complicated. This is why you need to learn how to use and read the Ichimoku cloud.
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Difference Between An Indicator And Strategy
When discussing the best strategies for trading crypto, you will also notice mentions of indicators. But there are important differences between these.
Indicators provide you with data, and then you create strategies using the data. In more detail, indicators are the data or analysis that you get from looking at charts and figures. You then combine that data and analysis from several indicators to create a strategy that includes when you will buy and when you will sell.
Looks Much More Interesting Right
As you can see, 2020 Ethereum price movements may look like it has only had one upwards movement to those who place their trades only looking at the long-term picture. The 1H chart is painting a different picture. Using the best crypto indicators for day trading lets you spot many different opportunities on the ETH/USDT market 24 hours a day if we want to be precise.
There are three major benefits of trading cryptocurrency at lower time frames off a 1 hour chart:
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How To Use Macd For Crypto Trading
Traders use MACD indicators along with RSI in crypto trading. This combination gives more certain signals in overbought and oversold zones. To find reversal points traders use trend lines and volume as well.
Example of usage MACD in crypto trading:
MACD with other indicators:
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Where Do All These Charts Come From Macd
If you do happen to develop favorite crypto follows on social media, youll probably notice a lot more charts than youre used to seeing if you started in traditional investing. The MACD is one of the indicators for crypto trading most beloved within the community. Day traders love to use these charts. This is because they demonstrate the relative bearishness or bullishness of a coin by using two fluctuating averages. These averages tell the traders when to buy or when to sell. Its all about looking at the crosses, which is a term that you will also hear frequently if you follow crypto influencers online.
Ideally, MACD can provide great signals for those who want to know when to buy. However, MACD is a trading indicator that many prefer to use in conjunction with other tools. There are some who believe that MACD has led them astray at times, which is why it recommended for traders to take a more macro approach when using this method. If you want to avoid overbuying and overselling, its best to also take into account factors such as volume and RSI .
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How To Use Mathematical Indicators To Trade Cryptocurrency
Technical analysis may appear somewhat subjective. Fortunately, with recent advances in charting software, it is now possible to complement chart analysis with the study of mathematical indicators, enhancing the objectivity in technical analysis.
Mathematical indicators that help describe price strength, direction, volatility and support/resistance are generated through calculations involving price and/or volume history data. You will want to understand mathematical indicators if you are learning how to trade cryptocurrency.
The price and/or volume data may be taken from any combination of the open, high, low or close over a time period. Mathematical indicators should be analyzed over a period of time, in conjunction with charting patterns and with the price itself.
When displayed graphically, mathematical indicators can help confirm and predict price action. It is a good idea to have a general understanding for how an indicator is calculated, but more critical is being able to interpret an indicators trading signals.
What Are Trading Signals
Trading signals are a set of rules and information provided to traders and investors to enter or exit a trade. These trading signals are usually provided by expert traders and teams of investors that are analysing the market on a regular basis.
A trading signal can include the price entry at which you will have to place the trade, a stop-loss that you can use to reduce your risk and exposure and take profit levels. Depending on the strategy implemented by the trading signals provider, you will have more risky or conservative setups.
In addition to it, there are some trading signals that can be directly implemented on top of Trading Views charts. These are going to be the most useful signals if you are a daytrader. These signals work as a traditional indicator that will show investors when to buy or sell an asset.
Nitros Bull is one of the trading indicators we use at Crypto University that is currently providing signals to crypto traders.
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Indicators For Crypto Trading A Winning Strategy
As you can see, there are many different ways to approach the art of crypto investment. There is no one-size-fits-all approach, as each trader comes to the table with a different set of goals in mind. Some relish the excitement of shorts while others prefer not much action at all. Youll need to tailor your strategy based on what youd like to achieve. It may take several indicators to get you to see the picture clearly. And you may come to rely upon just a few to let you know where your new favorite asset is headed.
As always, diversifying is a good idea. Relying upon tried and true crypto trading indicators like volume will always put you on the right path. And using the right software to examine market trends will almost always provide you with a more streamlined approach to maximizing your assets and mitigating any losses. Even in a market that is as wildly unpredictable as crypto, there are ways to suss out what the future may hold. And the good news is that there is no crystal ball required just a lot of charts.
Still need a little more help with strategy? Fortunately for you, our free Manward Financial e-letter can help you get started. Whether its monitoring indicators for crypto trading or gaining valuable insight into the latest crypto tips and tricks, our team has you covered. Sign up in the box below and join the thousands of other subscribers who are winning with crypto.
The Importance Of Bitcoin Dominance
Bitcoin, and especially the Bitcoin dominance is influencing the whole Cryptocurrency market. Bitcoin is still making or breaking the market. There are sometimes smaller cap coins that are not following Bitcoin movements, but most of them do. As an Investor, you should have an eye on Bitcoin dominance for different reasons. If you are using Tradingview, you can find the Bitcoin dominance under the Ticker BTC.D.
ð¡ Bitcoin dominance is a measure of Bitcoin’s market capitalization relative to the whole crypto market cap.
In combination with the Total Market capitalization Chart , you can get a feeling of how the markets are developing.
To simplify everything. If the Total Market Cap of the whole market is growing and Bitcoin Dominance is going down, we are likely in an Altseason and a Bull Market, and so on.
In this oversimplified graphic, you see when you should stay alert and how the money in the Cryptocurrency market usually flows. Cash is mostly flowing down from Bitcoin, first to the big players like Ethereuem, Cardano, and so on to Midcap Crypto Projects and then to Low Cap Cryptocurrency Project. The smaller the Market Cap of a project is, the bigger the risk and the possible reward. Be very careful when you play with the mid and small Cap Altcoins.
ð¡Altcoin season is a time in the crypto market where alternative coins tend to outperform the leading Cryptocurrency
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A Guide To Cryptocurrency Indicators
If youre a relative newcomer to cryptocurrency trading, its natural to feel a bit intimidated by the thought of using technical analysis. At first glance, technical trading is a discipline that features a lot of unusual jargon and some fairly advanced-sounding concepts.
Yet the truth is that almost anyone can become an effective technical trader you just need to build a proper foundation by learning some of the basics. Once that foundation is in place, even the more sophisticated analytical indicators will become fairly simple to grasp, allowing you to trade with a powerful new set of tools at your disposal.
Chart Settings Option In Tradingview
In addition to the numerous extra settings, the chart itself can be configured by right-clicking on it and selecting the settings option:
- The symbol panel can be used to manipulate the charts look by changing its colors or adding/removing various price lines.
- The information displayed in the status line can be used to manage OHLC data, buy and sell buttons , indicator titles, indicator values, symbol , and background.
- The scales panel is used to manage the details of price data displayed on the right side of the chart.
- The appearance tab governs the look of the background grid of the price chart and other minor visual elements.
- The trading panel allows you to customize how you trade the asset if you open an account with a broker.
- The events tab can be used to display or hide dividends, splits, earnings, and earnings breaks.
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How To Use Indicators For Cryptocurrency Trading
If you are unfamiliar with trading indicators, technical indicators are tools that traders and investors use to help analyze past price past action and to indicate where a crypto will head in the future. They are a crucial component of successful strategies based off technical analysis.
There are no holy grail indicators that guarantee a trade will be a winner. I am not going to BS you. These indicators provide confirmation of a trade thesis. They are not black and white buy and sell signals. New traders in our trading chatroom sometimes struggle because they become too over-reliant on technical indicators. Do not think that indicators are a failure because they didnt work on one trade. Indicators are used to support a thesis, but they shouldnt be the sole reason you put on or take off a trade.
Volume Weighted Average Price Day Trading Strategies
There are a few different ways to find trading opportunities using VWAP. Before we dive into them, its important to note that changing market conditions can have both positive and negative effects on these strategies.
For example, day trading usually trade 24 hours per day and 7 days a week, including weekends. VWAP will still calculate over the weekend, but it may not be the most suitable time to trade, as any large trade can push the market significantly in one direction or the other.
Therefore, consider these trading strategies from Monday through Friday, which is when the most volume is produced in crypto.
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How To Deal With New Altcoins That Look Promising
If I find a new Altcoin through my favorite TikToker or a friend who tipped me off, I try to do as much research about the projects as I can. There are also some influencers that I trust more, and then I am not doing as much research as I would usually do, and if I like the project, I invest a smaller amount. If I want to invest in a more significant amount, I might even do fundamental analysis and publish a full Crypto Review like with . I have a look at the Usecases, the Team & Investors, Tokenomics, possible demand drivers, active community, and whatever else comes to seem to be relevant. I also try to estimate how high the project could go. The primary metric for that is the market cap.
If you do not want to HODL for an extended period, setting yourself price targets is a good idea. It could be that you sell a part after making 2x, more after 3x, and maybe if everything looks good, hold the rest for a further ride up. This strategy depends on your preferences, but remember taking profits on the way up is never a bad thing. The profits can be reinvested in other promising projects, or you can buy the Dip if your favorite projects are temporarily going down.
If you are not Dollar Cost Averaging into a coin, when is the best moment to buy a currency? Maybe you heard that you should buy the Dip? How to do that.
My Top 3 Favourite Indicators For Technical Analysis Of Cryptocurrencies
This is not financial advice and I am not a financial advisor. Im sure therere plenty of licenced professionals in your jurisdiction. Speak to them, not strangers on the internet with Hyman Minsky avatars.
A few general remarks before I go through the list:
I) You dont need to use indicators to trade successfully. Therere plenty of traders who chart naked i.e. without any indicators and do so with tremendous success. That being said, indicators can certainly be helpful and supplement your analysis.
II) Less is more. Namely, in my experience the more successful traders are not necessarily those who know how to use and interpret the greatest number of indicators, but rather those who have truly mastered a couple of indicators and use them to their full potential.
III) I would strongly advise against using any indicator as a crutch. If youre unable to interpret price action and unable to find trade setups solely by looking at an empty candlestick chart, then you have no business using indicators which automate and map support and resistance for you. I sincerely believe that one is better served by learning price action first and using that as the basis of ones technical analysis, and then adding the fluff indicators afterwards to see if theres any confluence.
IV) Just because I didnt include an indicator in this list doesnt mean I think its a bad indicator.
3. Ichimoku Cloud
What it is
Why I like it
The list goes on.
How I use it
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How To Calculate Rsi
RS = Average Gain / Average Loss
Traditionally, RSI values are interpreted as follows:
- If RSI > 70, then the asset is overvalued and open for a market correction or trend reversal.
- If RSI < 30, it is an indication that the asset is undervalued.
- As RSI rises above the horizontal 30 reference level, bullish sentiments are identified.
- Similarly, when RSI falls below the horizontal 70 reference level, it is a bearish sign.