Understanding market indications through price charts is a crucial part of formulating your crypto trading strategy. A Candlestick chart, for instance, with its real-time pricing information of crypto assets and market trends is a popular forecasting tool that avid crypto traders use to perform technical analysis. Traders will often draw lines of support or resistance regarding the price of a crypto asset to determine the best entry levels. Another set of tools popular among traders is crypto indicators or technical analysis indicators that can be used in combination with technical analysis to confirm a decision. There are several crypto indicators in the market, but in this article we are going to cover the most trusted and reliable ones for you to look into. Each indicator calculates price indications on several parameters. To create the best crypto trading strategy, you can compare and combine the alerts from multiple solutions and derive a common pattern to improve your price forecasts.
What Purpose Do Crypto Technical Indicators Serve?
In order to stay on top of their investment portfolio, serious traders and investors would always make a trading decision based on factors like market patterns, historical price, volume and volatility aspect of an asset. Crypto indicators or technical analysis indicators take into account all these factors and provide crucial information through mathematical calculation on how the asset will behave in the short future.
C-Trade’s Trading View
C-Trade provides TradingView charts to allow users to observe and monitor the price charts of hundreds of assets, including cryptocurrencies, and share and discuss crypto trading ideas about the market. The indicators are a key part of technical analysis that provide traders with highly sought-after degrees of price predictability on volatile markets such as crypto.
TradingView doesn’t require you to download a client since it is entirely browser-based as on the C-Trade trading section.
TradingView is free to use for anyone. But there are also paid subscriptions that increase the number of charts and indicators you can view simultaneously. For beginners, a free account with three indicators and one TradingView chart could be a good start.
Crypto Indicators: Categories
Crypto indicators can be divided according to four parameters:
Also known as oscillators, these crypto indicators indicate in which direction the market is moving, whether there’s going to be a lot of buying or selling action.
A momentum crypto indicator tells the trader for how long a market trend is likely to hold or whether there is going to be a reversal. Relative Strength Index is a momentum indicator that is often used in conjunction with trend indicators to strengthen a forecast.
Assessing the trading volume is a factor that technical analysis also takes into consideration. Changes in trading volume affects the price of a crypto asset. Volume-oriented crypto indicators like On-Balance Volume indicate the strength of a market move based on the volume whenever there's a price change.
Volatility calculator is the fourth type of crypto indicator which you can use to get an understanding of when the market is likely to change directions based on the lowest and highest historical security prices.
The Best Indicators for Crypto Trading in 2022
Here’s a list of the best indicators for crypto trading in 2022:
Relative Strength Index (RSI)
RSI indicates the strength of a bearish or bullish price. For instance, RSI demarcates an asset as overbought if it scores above 70 and oversold if it scores below 30. You can rely on the RSI to understand the momentum of a crypto price.
Also known as Moving Average Convergence Divergence, MACD is an oscillator indicator trusted by serious investors. MACD provides you a point of comparison between two moving averages. You would be able to know whether a market sentiment is going to persist or get subdued by assessing the relationship between the two moving averages that MACD exhibits.
The convergence of the averages indicate a decrease in momentum which means bearish sentiments would ensue. On the contrary, the increase in the distance between the averages, also known as divergence, typically indicates a bullish market. Traders often use MACD in combination with RSI to verify their forecast.
A common way to plan an entry and exit strategy for trading a crypto asset or any financial instrument is assessing the buying and selling pressure of that asset. Stochastic oscillator, which is another momentum indicator, calculates whether a financial instrument is overbought or oversold. Based on these findings it indicates market sentiments. It is represented by two lines:
- One line displays the real value of an asset.
- The other line displays the simple moving average of the asset’s price over three days.
These lines run parallel to each other when a specific market sentiment continues. However, the crossing of these lines suggest a reversal.
A stochastic oscillator displays readings between 0 to 100. Values below 20 is considered as an oversold market indicating bearish sentiments. Values above 80, on the other hand, indicated an overbought or bullish market.
On Balance Volume
On balance volume (OBV), as the name suggests, is a volume indicator that determines the strength of the price signals based on trading pressure. For instance, a positive volume pressure usually suggests a price increase. OBV indicates a positive volume pressure based on the highest of highs without a resistance zone. On the other hand, it indicates a negative volume pressure, meaning price is going to decrease, based on the lowest of lows without a support zone.
Chaikin Money Flow
You can use Chaikin Money Flow to learn about overbought and oversold positions in the crypto market. It evaluates the inflow or outflow of an asset during a period of time and calculates the strength of a certain position. Traders usually assess price data of 14 days before making the final trading decision.
The Bollinger Bands is a crypto indicator that bases price predictions on the volatility of an asset. It is represented by three bands.
- Middle Band – Calculates the Simple Moving Average spanning over 20 days.
- Upper Band – Calculated as Simple Moving Average plus two times the standard deviation of the price.
- Lower Band – Calculated as Simple Moving Average plus two times the standard deviation of the price.
The price of an asset moving out of the upper and lower bands indicates a market reversal. Wider bands mean increased volatility and narrower bands indicate limited volatility.
Crypto indicators or technical analysis indicators for cryptocurrencies help reaffirm your trading decision, and thus, should be a necessary tool in your crypto trading strategy. Regardless of the type of financial instrument you want to trade, be it an underlying asset or its perpetual contract, timing is your only best friend. Crypto indicators help you assess market signals based on time and makes forecasting more accurate and easier.
There are four types of crypto indicators, the results and indications of which you can combine and compare to arrive at a common conclusion, but never overdo it. Stick to a maximum of 6 indicators to make a sound decision but anything more can end up overwhelming you. If used correctly technical indicators for cryptocurrencies can maximise your gains.
For any trader looking for a free and competent solution with a great number of useful tools, C-trade’s TradingView is a solid option both for beginners and experienced traders. TradingView’s educational materials are also free to access and cover all the necessary basics of charting and technical analysis in detail.
TradingView is a considerably simple and cheaper platform for a complete novice. Also, the integrated social network helps newcomers learn the ropes of technical analysis and trading,
All in all, the TradingView section of C-Trade is definitely worth checking out if you want to try chart tools.
Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. C-Trade, its affiliates, agents, directors, officers, or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.