Trading is a risky business. The constant unpredictability is lurking in the dark when you make an investment. Some people get lucky in this business. They go blind yet come out as successful. However, if you are one of those people who believe in ‘making their own luck’ then cryptocurrency trading indicators are for you. They give you an analysis of the market prior to making an investment. This helps in speculating the future of investment.
Cryptocurrency markets are too volatile. Traders welcome any sort of information which tells them what to expect. That’s where the indicators come in. Using indicators may sound like a difficult task if you are a beginner. Nonetheless, over time you can master the art of technical analysis and reading charts. This helps in efficient and profitable trading operations.
Here are some of the best cryptocurrency trading indicators that can help you predict the future of different assets in the market:
RSI (Relative Strength Index):
It is a technical indicator that deciphers strength or weakness of an asset. It measures the recent price change in a stock. A comparison is drawn between the recent closing price and the previous closing price. This leads to the identification of future prices.
This indicator fluctuates between 0 to 100 points. It guides traders on whether to buy or sell a stock. When the index goes below 30 points this signals that asset is oversold, so it is a high time to buy because prices are likely to go up. On the other hand, 70 points or above indicates that asset is overbought so it’s the right time to sell as prices are likely to go down in the future. The time frame of evaluation is generally 14 days but can be re-adjusted for a longer period of time.
RSI is the most useful indicator for traders in the cryptocurrency market. It simple and gives clear direction with promising outcomes.
MACD (Moving Average Convergence Divergence):
The basis of this indicator is the exponential moving average. Along with the help of other indicators MACD guides traders on exit and trading points. This indicator turns two moving averages into a Decision Point Price Momentum Oscillator (PMO) by subtracting moving averages from each other.
MACD is all about convergence and divergence of two moving averages. When moving averages are going away from one another then divergence is happening. Similarly, when two moving averages are getting closer to meet at one point then convergence is taking place.
This indicator fluctuates up and down the centerline. In order to gain an advantage from this indicator, pay attention to the position and movement. When an indicator is above the zero lines then the price of a stock is increasing and when it is below then the price is decreasing. It is high time to buy a stock when you view a positive divergence. Negative divergence points towards the selling of the stock.
SMA (Simple Moving Average):
This indicator shows the price of an asset over time. Simple Moving Average is calculated by the addition of closing prices and then dividing that by the time period. This indicator is of importance because it helps in the understanding of future trends and avenues of investment.
The Golden Cross (where Short-term average is crossing over the long term average) is an indicator of an upward trend. You can also adjust the short-term and long term averages in your desired time frame
SMA is from the same family as MACD. Both of them work through moving averages of an asset to show future developments.
Bollinger bands are also a useful market indicator for cryptocurrency trade. They are represented by an upper band and a lower band. In between these bands is a simple moving average indicating price difference of the asset over time.
When the volatility of an asset is high in the market then the upper, lower, and middle bands are widened. In the case of settlement of the market, the bands become thin.
Like you learned in the start, trading indicators give you a chance to make your own luck. They provide you with the necessary information regarding future developments. You will have a broader perspective regarding investments and trading with the help of indicators. Nevertheless, with experience in learning, you can earn profit to the lengths with cryptocurrency trade.
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