With the popularity of crypto trading on an exponential rise, now is the time to inform yourself of the signals and indicators that predict the sentiments of the crypto trading markets. You want to be ahead of the curve, after all.
The numerous numbers, lines, or colors on the crypto trading charts can leave you scratching your head. In the world of crypto trading, it's suggested to look up chart patterns and cryptocurrency indicators and not rely on your gut if you want to make it big. Crypto trading indicators, thus, are an indispensable tool for making the most out of the markets. They enable you not just to make informed decisions but also maximize profits and minimize losses.
If you are keen on taking your trading game to the next level, dive into this article that dives into signals and indicators in crypto trading, one by one.
The first question in your head must be - What are crypto trading indicators?
Indicators in crypto trading are tools employed by traders to assess market sentiments. Trading indicators are of use in diverse markets-trading stocks, foreign exchange, and cryptocurrency, to name a few. Though most crypto traders resort to long-term hodling, decisions in the trading sphere rely on several data points.
These days traders of all kinds-including cryptocurrency traders have turned to trade indicators, realizing that trading on emotion is not the best idea.
Cryptocurrency trading indicators are your regular technical interpretation trading indicators but in a cryptocurrency context.
When an asset undergoes extended upward price movements, markets take this as a sign of the asset being overbought. Likewise, lengthened periods of plummeting might symbolize that the asset is oversold. When entering markets, traders seek these signals.
Of course, no single technical indicator is enough to lead you to market riches; and traders also have to have a hang of risk management and trading psychology. However, specific strategies have made a mark and remain popular among traders in the crypto trading world.
If this is your first attempt at understanding crypto trading indicators, it is advisable to familiarize yourself with some of the jargon and concepts associated with cryptocurrency trading. After much knowledge and research, here's a list of the top 10 indicators we narrowed down on.
All these indicators listed below help in identifying what the price of an asset will do. For instance, Moving Average (MA) indicator recognizes the direction of a current price trend without the intervention of shorter-term price spikes. MACD is an indicator to detect changes in drive-by matching two moving averages etc.
Crypto Trading Indicators
Relative Strength Index (RSI)
The RSI is a momentum indicator that shows the rate (momentum) at which the price is changing. In other words, if the RSI is over 70, the asset is overbought, and when it's under 30, it is oversold. It estimates the magnitude of recent price changes (usually the previous 14 periods – so 14 days, 14 hours, etc.) to accomplish this. Extreme values predict an impending trend reversal or pullback.
The data is shown as an oscillator with values ranging from 0 to 100. If momentum increases while the price is soaring, the uptrend is strong, and many buyers are stepping in. If momentum is dwindling while the price is rising, it shows that sellers will soon take over the market.
The RSI may present incorrect or misleading signals, so weigh other factors before entering a trade.
Moving Average (MA)
A moving average filters out market sound and highlights the course of the trend. MA is based on past price data; hence, it's a lagging indicator. The more extended the period, the more significant the lag.
The two moving averages used a lot are the simple moving average (SMA or MA) and the exponential moving average (EMA). The SMA is sketched by taking price data from the specified period and producing an average. For example, a 10-day SMA is plotted by calculating the average price over the last ten days.
The EMA gives more importance to recent price data. Therefore, it is more reactive to up-to-date price action. The 200-day SMA will react sluggishly to recent price action than the 50-day SMA.
Suppose the price stays above the 200-day SMA for a prolonged period. In that case, many traders take the asset to be in a bull market.
Traders may also utilize moving average crossovers as buy or sell signals. For illustration, if the 100-day SMA crosses below the 200-day SMA, it may be considered a sell signal. It indicates that the average price over the last 100 days is now below that of the last 200 days.
The approach behind selling here is that short-term price moves are no longer following the uptrend, so that the trend may be inverting.
Moving Average Convergence Divergence (MACD)
The MACD determines the momentum of an asset by determining the relationship between two moving averages. It's made up of the MACD line and the signal line.
The MACD line is calculated by subtracting the 26 EMA from the 12 EMA. This is later plotted over the MACD line's 9 EMA – the signal line. Many charting tools also often consolidate a histogram, showing the distance between the MACD line and the signal line.
If the price is making a higher high, while the MACD is making a lower high, the market may be turning soon. The MACD, in this case, tells us that the price hikes while momentum drops, so there is a larger likelihood of a pullback or reversal happening.
Traders also use this indicator to look for crossovers between the MACD line and its signal line. For example, if the MACD line crosses above the signal line, it suggests a buy signal. If the MACD line crosses below the signal line, that may indicate a sell signal.
The MACD is often used in combination with the RSI, as they both measure momentum and several factors.
Stochastic RSI (StochRSI)
The Stochastic RSI is a momentum oscillator to ascertain whether an asset is overbought or oversold. As the name implies, it's a derivative of the RSI, i.e., formed from RSI values rather than the price data. StochRSI is generated by applying the Stochastic oscillator formula to the common RSI values.
Typically, the Stochastic RSI values range between 0 and 1 (or 0 and 100).
StochRSI can generate many trading signals, owing to its incredible speed and sensitivity.
A StochRSI reading above 0.8 is customarily considered overbought, while a value below 0.2 may be regarded as oversold.
A value of 0 means that the RSI is at its lowest value in the measured period (the default setting is 14). 1 as the value signifies that it is at its highest value in the evaluated period.
The StochRSI symbolizes that the RSI values (which StochRSI values are derived from) are near the heights of their recent readings. However, the StochRSI is more sensitive than the RSI indicator. Hence it causes more false or misleading signals.
Bollinger Bands (BB)
Bollinger Bands gauge the volatility of the market, as well as overbought and oversold statuses. They are made up of - an SMA (the middle band) and an upper and lower band.The upper and lower bands are two standard deviations apart from the middle band—the distance between the bands increases and decreases as per the increase or decrease in volatility.
The closer the price is to the upper band, the closer to overbought conditions the mapped asset may be. The closer the price is to the lower band, the closer to oversold conditions it may be. Mostly, the price stays within the bands, but it may crack above or below them sometimes. It can indicate extreme market conditions.
Another concept of BBs to remember is called the squeeze. It is a period of low volatility, where all bands come very close to each other. This may indicate possible future volatility.
Though indicators exhibit data, the understanding of that is very distinctive. Sometimes, step back and acknowledge if your prejudices are influencing your decision-making.
A direct buy or sell signal for one trader can be market turbulence for another. Indicators are at their best when used in union with each other or with methods like fundamental analysis (FA). The best shot to grasp technical analysis (TA) is through a lot of practice.
Buying the "right" coins opens doors to exceptional returns. Here's precisely where these crypto signals come into play – to help you identify which cryptocurrencies have tremendous potential.
Crypto Trading Signals
The Crypto trading signals are based on technical analysis, the latest headlines and talks, and market conditions. Opting for crypto trading signals provided by trained and expert traders is an available option too.
Crypto trading demands some experience, which everyone lacks when setting foot into this territory. When you're just getting started, acquiring free crypto signals is an excellent way to learn crypto coin trading.
What are crypto trading signals?
Crypto trading signals are trading ideas or recommendations to buy or sell a particular coin at a specific price and time. The crypto trade signals are formed manually by a professional trader or by trading algorithms and bots that automatically send the trade signals.
Habitually, the trade signals have also attached a take profit and a protective stop loss. Now, many crypto trading platforms allow copy trading. If you highly trust your trading abilities, you can use crypto trading platforms to share your trades with others and receive increased profits.
The free crypto trade signals are a great option. Still, you need to pay a subscription fee to a crypto signal service provider if you require something more secure. You can choose a monthly, quarterly, or yearly subscription plan.
That crypto signal provider transfers the trade signal directly to your email, smartphone, or through any other most active means of communication.
Crypto signals can profit you only if they are reliable with a proven track record. Otherwise, it's best to perform your personal crypto trading chart interpretation, and it might generate more beneficial outcomes.
Crypto Trading Signal #1: Action – Buy/Sell
The first component of a typical trade signal intimates the action you are required to take. When trading cryptocurrencies, there are only two actions, either to buy or to sell.
Crypto Trading Signal #2: What Coin to Buy/Sell
The second part of a crypto trade signal indicates what coin you need to buy (or sell).
Trade signals can be dispensed for Ethereum, Litecoin, Ripple, or any altcoins that the crypto signal service provider wants to send.
Crypto Trading Signal #3: The Price
All signals suppliers will give you the price of buying or selling a cryptocurrency. The crypto trading price can be the current market price or a price over/under it.
If the cryptocurrency signal provider grants you a coin that needs to be bought or sold at the exact moment, you need to act fast to get the same price.
In most situations, when you're provided a crypto signal with a prevailing market price value, you'll get a somewhat different price. This can be the cryptocurrency exchange having slightly different prices. Or due to the sizeable short-term volatility, the market might be propelling too fast. An automatic solution like the arbitraging trading software can settle this issue. You can nevertheless take advantage of crypto signals if the market didn't move that much.
Crypto Trading Signal #4: Take Profit and Stop Loss Orders
All signals must come with a profit and stop-loss order that gives you a proper risk to reward ratio. By practicing profits and stop-loss orders, you need not monitor the trade work all the time. You'll not have to guess where to close the trade.
Crypto Trading Signal #5: Additional Information
Your chosen cryptocurrency trade signal provider can combine further analysis and promoting crypto trading charts.
For instance, the crypto signal provider can give you ways to incorporate the time factor and apprise you to close the trade by the appropriate hour. Moreover, you can obtain a complete analysis of the ideas that went into that specific trading idea. The cryptocurrency trade signal can check some risk management as well.
Crypto Trading Charts
There are two types of cryptocurrency traders- one who wants to invest significant time and effort to learn themselves, the art of trading. And the second kind of crypto traders-who wants to mint money from the cryptocurrency market without considerable effort.
If you come in the second category, try to use some of the most significant crypto signals to accomplish your goals.
Learning cryptocurrency trading is an arduous task, and that's where a crypto signal provider comes as the knight in shining armor.
However, if you see yourself in the first category, try using crypto trading charts to scrutinize the crypto trading market, finding the best trading signals for yourself.
When following a crypto signal service, you transfer the responsibility on someone else's shoulders. Here, it is easy to blame someone else if the crypto strategy doesn't work.
To trade in the cryptocurrency market, fortunately, you need to understand the reasons behind the trade signal. Using your own crypto trading chart can gain you more trust in the trade you grasp, and you'll be able to control your market exposure better.
Conclusion – Crypto Coin Trading Signals
If you want to be a self-governing, successful crypto trader, you need to learn the art of crypto trading and rely on yourself. If you are of the belief that crypto trading signals can help you grow your crypto trading account use the crypto trading platforms that allow copy crypto trading.
Should you subscribe to crypto trading signals?
You do you. Conduct your research and judge for yourself if this is a great idea. However, keep in mind that safe cryptocurrency trading signals are troublesome to find.
If you want to bequeath the whole decision-making process to a professional and don't have enough time or experience to analyze the crypto market, counting on others can be a good idea.