Crypto trading involves buying and selling digital assets like Bitcoin, Ethereum and other cryptocurrencies to make profit. Crypto trading is decentralized and allows global transactions anytime, crypto trading offers greater liquidity, as cryptocurrencies can be bought and sold more easily than other assets.
Crypto trading indicators are based on the price and volume of an asset. They can be used to identify trends, measure volatility and provide signals for trades. With the help of indicators, traders can identify entry and exit points and track price movements. Crypto trading indicators can help you maximize your profits and minimize your risks.
There are three types of crypto trading indicators:
- Leading Indicators
Leading indicators are indicators that signal where the price could move next. Leading indicators can help you enter trends early, providing favorable trade entry and exit points.
- Lagging Indicators
Lagging indicators are trend-following indicators because they follow market trends. These indicators only focus on historical data and do not suggest what might happen next in the market.
- Coincident Indicators
A coincident indicator is an economic indicator that provides information on the current state of the economy. Coincident indicators occur in real time.
Top 10 Technical Indicators for Successful Crypto Trading
- 24-Hour Volume
The 24-hour volume indicator is used to measure the total volume of a symbol traded in the last 24 hours. The 24-hour volume is a metric used to track the total value of all cryptocurrency transactions within a 24-hour period. It can be used to measure the market’s interest in a particular symbol and gauge its overall health. A high 24-hour volume means that there is a high demand for the symbol and a low 24-hour volume may indicate that the symbol is not as popular as others.
- Bollinger Bands
Bollinger bands are a technical indicator for crypto trading and consist of three bands:
Middle band: The middle band is Simple Moving Average (SMA).
Upper band: The upper band is the SMA plus two standard deviations to define a measure of variations from the middle band.
Lower band: The lower band is the SMA minus two standard deviations.
Bollinger bands are made up of two lines upper line and lower line. The indicator comes with period 20 for Simple Moving Average and two standard deviations for each of the upper and lower lines. The band automatically expands when volatility increases and narrows when the market goes down.
- Relative Strength Index (RSI)
The RSI is a trading indicator used in crypto trading to measure the strength of a cryptocurrency’s price movement. The RSI compares the magnitude of a cryptocurrency’s recent gains to its recent losses, providing traders with an indication of whether the asset is overbought or oversold. The RSI index measures momentum and oscillates on a scale between 0 and 100. The calculation is based on the most recent 14 periods or days, one candle represents one day. The RSI is based on lower level and upper level and shows when a market is overbought and oversold. Upper level represents number above 70, which indicates that the market is overbought and lower level represents number below 30 means that the market is oversold.
- Moving Average
The Moving Average is a technical crypto trading indicator showing the average price of a specified number of recent candles. The Moving Average can be helpful in in identifying trends, determining potential entry and exit points and making more informed trading decisions. Moving Average indicator consist of simple moving average, exponential moving average and weighted moving average each of them is calculated differently.
- Moving Average Convergence Divergence (MACD)
MACD is a technical indicator for crypto trading and it is used to identify the momentum of cryptocurrency. There arte two types of lines in MACD indicator: The MACD line and the signal line. When the MACD line crosses above the signal line, it indicates a bullish trend and when MACD line is below the signal line it shows a bearish trend. Along with these two lines, a histogram is also included in MACD indicator. The histogram is simply the difference between the MACD and signal line. When MACD is bullish, the histogram will be above the zero line and when MACD is bearish the histogram will be below the zeroline.
- Commodity Channel Index (CCI)
The CCI indicator is used to find possible oversold and overbought levels. The CCI values will fall between 100n and -100. When the CCI moves above 100, it represents that the market is overbought and provides an opportunity for traders to buy at a given time. Conversely, when the CCI move below -100, it indicates that the market is oversold and there will be no signal to sell.
The Supertrend is a trend-following indicator that generates a buy or sell signal after a trend is underway. It changes color based on the trend detected. It is characterized by red and green lines. A green indicator represents a buy signal, while a red indicator is a sell signal. The point where the indicator line changes color is called the crossover point. Green line shows the market’s bullishness and the red line shows the market’s bearishness.
- Stochastic RSI
The Stochastic RSI combines two indicators stochastic and RSI, to forecast trade entry and exit times based on collected data. It tells overbought and oversold market conditions. The value of this indicator falls between 0 and 100. The Stochastic consists of two lines K and D. K is often referred to as the fast stochastic, while D is the three-day moving average referred to as slow stochastic. Readings over 80 suggest that crypto is overbought, while readings under 20 suggest that crypto is at an oversold level.
- Moving Average Ribbon
The Moving Ribbon is a technical indicator for crypto trading and it is used to identify trends and potential trading opportunities. It is a visual representation of four moving averages plotted on a chart, forming a ribbon-like pattern. The ribbon is created by plotting multiple moving averages of varying lengths on the same chart, with shorter-term moving averages placed closer to the price and longer-term moving averages placed further away. This creates a ribbon-like pattern that can help traders identify the direction of the trend and potential entry and exit points.
- Pivot Points
Pivot Points are technical indicator for crypto trading that provides more apparent price levels as the turning point, resistance and support over different periods. The pivot points are based on the price action of the previous day’s trading. The pivot point is based on the previous high, low and close prices. Traders can easily use the pivot points to find reliable buy and sell signals and to determine exit points. Trading above the pivot point indicates a bullish trend while trading below the pivot point indicates a bearish trend.
In this article, we have discussed the top 10 technical indicators for crypto trading which can help traders to make more money when trading cryptocurrencies.
Frequently Asked Questions (FAQs)
Is MACD good for crypto trading?
Yes, MACD can be good for crypto trading as it gives a clear understanding of long and short-term price momentum.
Which are the most commonly used indicators in crypto trading?
The most commonly used indicators in crypto trading include Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD) and Bollinger Bands.
What is the best trading strategy in crypto?
The best trading strategy for crypto depends on individual preferences, risk tolerance and trading style.