Technical indicators are one of the most effective methods for traders to monitor market trends and pinpoint the ideal opportunities to enter or exit the markets. It doesn’t matter whether it’s forex, stocks, or cryptocurrency, these technical indicators can be used to make sensible, calculated trading decisions.
There are plenty of trading platforms you can use to buy and sell the value of cryptocurrencies. MetaTrader 5 is considered the industry standard among retail and serious crypto traders. That’s due to its sophisticated yet intuitive trading functionality, including more than 80 technical indicators and analysis objects to help you make an informed decision. It’s developed by MetaQuotes Software, the brains behind MetaTrader 4, which set the benchmark for forex traders worldwide.
Understanding the common technical indicators for crypto trades
Technical analysis is very important in cryptocurrency trading. That’s because the markets are still very immature and volatile. Even Bitcoin is prone to huge swings of 5%-10%, which is a huge price change with one consistent move. Technical indicators can help to frame your cryptocurrency trades, pinpointing entry and exit points, usually underpinned by support and resistance in the market.
Below, we’ll explain the nuts and bolts of some key technical indicators that crypto traders lean on to improve the strike rate of their trades.
There are two types of moving averages that crypto traders like to use – simple moving averages and exponential moving averages. The former displays the average value of a cryptocurrency over a set timeframe. It smooths out price data to pinpoint trends in the market. The latter looks at the most recent values of a cryptocurrency, making it a more responsive option.
Cryptocurrency traders look to RSI to gauge the pace and gravity of alterations to a cryptocurrency’s market value. RSI fluctuates between zero and 100. You can use the current RSI figure to understand whether a crypto asset is overbought (overpriced) or oversold (underpriced). An RSI figure of less than 30 indicates that it could be a good time to buy, while an RSI figure of more than 70 suggests the asset is starting to move above its fair market value.
No, we’re not talking about Bollinger champagne. Bollinger bands appear with a central band and two bands on either side of it overlaid onto a price chart. The middle band is typically a simple moving average over the last 20 days. The outer bands are defined two standard deviations above and below the middle band. Like RSI, these outer Bollinger bands can pinpoint when a cryptocurrency is overbought and oversold. However, it can also alert traders to volatile conditions if the price is moving all over the place.
Crypto traders use technical indicators to piggyback on trends, both upward and downward. ADI is one of the most effective trading signals to identify price trends in the crypto markets. Like RSI, this also has a range of zero to 100. Any reading above 25 suggests the price move has a strong trend up or down. Meanwhile, anything below 20 indicates a weaker or sideways movement.
It's important to reiterate that using technical indicators alone may not yield the best possible results when trading the price of cryptocurrencies. However, when paired with fundamental analysis using reliable figures within crypto media, it can help to reinforce or go against your initial perspectives of the market.
Disclaimer
The information on Coinsniper is user-generated and not verified. Coinsniper does not provide financial advice or facilitate transactions.
Also note that the cryptocurrencies listed on this website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments.
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