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- 1 The cryptocurrency market flourished over the past decade, combining more and more investors and traders onboard.
- 2 Technical indicators offer a method of analyzing price patterns to help traders anticipate where the prices are headed.
Analyzing markets can be confusing without technical indicators. Investing and trading in markets is risky and to minimize the risk, the concept of technical indicators was introduced. Technical indicators in simple terms are mathematically based calculations considered by the traders to examine the financial markets and make informed decisions.
Let’s uncover the top three indicators available in the crypto market and their significance.
Moving Average Convergence Divergence (MACD)
Moving Average Convergence Divergence (MACD) is one of the most popular tools used by crypto traders. It is a good buying and selling simple momentum indicator mainly used to trade trends. The indicators appear on the chart as two lines which are the signal line and the MACD line, which swing without boundaries. The indicator shows a positive value once the Exponential Moving Average (EMA) is above the slow EMA and vice versa. Identification of trend direction, trend momentum measurement, and search for various market entry points to trade are some key benefits of MACD technical indicators. In addition, clear buying and selling signals offer more clarity to the crypto traders, allowing users to find divergence between MACD and crypto prices.
Bollinger Brands
Bollinger Brands is another technical analysis tool available in the crypto market to make trading risk-free and profitable. The indicator was introduced by John Bollinger to showcase the price range in which a cryptocurrency can be traded. Bollinger Brands is very popular among crypto traders assisting them to identify entry opportunities and exit points in the crypto market. The overall working of the tool relies on three lines: the moving average, the Lower band, and the Upper band, relying on the standard deviation of the asset’s price. The indicator is mainly used for oversold and overbought trade signals, offering crypto traders an idea of where the market is shifting based on prices. In addition to this, the indicator is also used to identify potential trend reversals as well as cryptocurrency price volatility.
Relative Strength Index (RSI)
Another popular indicator used in crypto trading is RSI, mainly used to measure the strength of crypto’s price action, ranging between 0 to 100. The indicator is mainly used to examine trends from downward to upward momentum and vice versa. RSI below 30 shows an oversold momentum representing the asset’s price experiencing an upward trend reversal. If the RSI is below 70 indicates an overbought momentum. The indicator provides various signals and can be used in varied timeframes for different assets with minor changes in setting, which makes it more compatible and efficient for crypto traders.
Apart from this, there are several other indicators including the Stochastic Oscillator, Commodity Channel Index (CCI), On-Balance Volume (OBV), and Chaikin Money Flow (CMF) which help crypto traders make informed decisions.
Conclusion
The craze for crypto trading is at its peak and to make a good trade, traders are craving for more reliable and effective technical indicators. Relative Strength Index, Moving Average Convergence Divergence, and Bollinger Brands are powerful indicators in the crypto trading market.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
