When investing in the cryptocurrency market, it’s essential to be able to read the trends and crypto charts. Several indicators can help you track and predict price movements. This guide will explain how each indicator works so you can apply them to your crypto trading strategy.
100-day Exponential Moving Average
The 100-day moving average is a well-known indicator. It’s used in many markets and industries to measure trends and overall market sentiment. When it crosses the 100-day moving average, it can indicate that a trend reversal is on the horizon.
Cryptocurrency chart patterns like this can have significant implications for your trades because the price of cryptocurrencies tends to fluctuate sharply over time and across different exchanges. Suppose you’re trading on an exchange that has crossed above its 100-day moving average. In that case, you’ll want to sell your holdings before they drop back down again to avoid getting caught in the downward spiral as everyone else rushes out of their positions into one another (a phenomenon known as panic selling). On the other hand, if you see an exchange’s price cross below its 100-day line while everyone else remains bullish about its prospects, you might want to consider buying more coins.
Relative Strength Index (RSI)
RSI is a momentum oscillator that measures the speed and change of price movements. RSI ranges from 0-100, with higher values indicating a stronger trend. The RSI is calculated by subtracting the 30-period simple moving average (SMA) from the 14-period SMA. The result is divided by 100 to get an index between 0 and 100.
The 14-period SMA is a proxy for short-term price action before smoothing out volatility, while the 30-period SMA represents longer-term price trends.
RSI can be used as either an overbought/oversold indicator or as an indicator for divergences between price and momentum indicators such as MACD, ADX, and others.
Stochastic RSI is a momentum indicator that measures the speed and change of price movements. It’s based on closing prices over a certain period, like the SMA or EMA, but it uses opening prices instead.
The Stochastic RSI is usually plotted on a graph with two lines: one representing the fast line and another representing the slow lines. The difference between these two lines reflects whether there has been an increase or decrease in price over a specific period (usually minutes or hours).
Bollinger Bands are a technical indicator that uses standard deviation to measure the volatility of an asset. They consist of Bollinger Bands, wide bands that show an asset’s high and low price range, and two lines called the 20-day simple moving average (SMA) and two standard deviations from that SMA.
The bands contain upper and lower limits designed to keep price fluctuations in check with a reasonable amount of volatility by identifying extreme trading ranges.
Standard deviation is calculated based on past closing prices of a given security over a specified period (e.g., 20 days). It measures how much prices moved away from their mean over this period—the more variation there was between individual days’ closing prices, the higher the standard deviation.
Volume analysis is a method of determining whether there is an upward or downward trend in a currency. The measure of volume gives you an indication of how many transactions have occurred, which can be a sign that there’s a reversal coming soon. High volume indicates plenty of people buying or selling the coin, and vice versa for low volume.
When it comes time to implement these indicators into your investment portfolio, consider utilizing a crypto exchange that already offers competitive analysis tools and charting for your cryptocurrencies. The FTT DAO and FTX app are great resources for anyone learning about these indicators or wanting to build their own dashboard with these metrics at their fingertips. From the FTX platform, you can manage your crypto investments at once and apply these indicators to the charts.
Fibonacci Retracements and Time Zones
One of the most popular techniques in technical analysis is Fibonacci retracements. They are horizontal lines that mark support and resistance levels and are based on the Fibonacci sequence. While not consistently effective, they can help predict future price movements by identifying areas where increased buying or selling pressure may occur.
The idea behind using Fibonacci retracements is to predict future price movements. The primary strategy here is targeting what traders call “price objectives,” which are calculated by adding or subtracting a certain amount from an asset’s current price to get an estimated target level. For example: If Bitcoin has been trading between $5,000-$5,500 for several months but has recently fallen below $5k, then it might be a good idea to buy at these levels because they’re likely near their lowest point in the future (and therefore could rebound sooner rather than later).
Start Exploring Crypto Indicators
The indicators are an excellent tool when following a long-term investment strategy. You can use the indicators to decide which coins and tokens are worth buying and how much of them you should buy. You can also use them to guide you when it’s time to sell your investments and take some profits off the table.
The crypto market is volatile, but you can see past the noise with the right indicators and make informed decisions. You can learn more about these crypto indicators by joining an online crypto community like the FTT DAO.
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Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.