Whether you are a novice or a seasoned trader, trading cryptocurrency can be a big challenge. The high volatility of the market means that it can leave even an expert cold and unsure of what to do which is why having a basic understanding of the market indicators are needed for efficient technical analysis.
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Naturally, the market swings are anyone’s guess, but with the right strategy, a good command of the indicators that are available, and the savvy to understand what the analytics are saying, you have a great opportunity for making money on the crypto markets.
Technical analysis tools are used by crypto traders to gain insight into the movement of supply, demand, the price movement and directional momentum of digital currencies. They serve as tools that can be used to guide your buying and selling options.
As mentioned earlier, knowing the basics of the market indicators can save your wallet and a lot of heartache – or at least give you a fighting chance to be a successful trader.
Moving Average
The Moving Average (MA) is a simple way of displaying what has been going on with the price action. The beauty of the MA is that you can go from a very low value, like a 10 MA, to very long periods such as the 100 MA.
And depending on what you want to see, the moving average can allow you to see the overall trend, the segmented area of time, or if you want to know the angle of the daily time frame of price.
The moving average filters out noise so you can hone in and see what has been happening with the market; its highs and lows.
Moving average comes into trade a lot because it is the way you get to trigger a trade. You can decide to buy a certain altcoin because there is a pullback you have noticed from the moving average. You can say that once price hit your moving average, you can now decide on your short or long position.
ADX
ADX is an average directional index, otherwise referred to as a trend strength indicator. This is a handy tool is used for discovering market trends by quantifying everything into a numerical value, then arranging data in a meaningful way.
On its own the ADX may not be best to use it as the only indicator to make final decisions on your trade. Let’s just say it is an important supplemental tool. While it specializes in seeing trends, it should never be used as the only technical tool that influences your trade decisions.
Why? Because ADX really only plots a single line with values ranging from a low of zero to a high of 100, which is often shown with the Directional Movement Indicator (DMI) on a chart.
Stochastic Oscillator
The Stochastic Oscillator identifies momentum in the market for the oversold or overbought conditions of a trade. The idea of this indicator is that when stocks trend upwards, its close price will tend to trade at the high end of the day’s price action or trade range. As a trader, you can look at the first oversold condition after a long period of overbought.
Like the ADX, it uses a 0 to 100 range and the sensitivity of the oscillator can be adjusted by taking into account the Moving Average and the two lines of the oscillator which indicates the actual value of the session and its 3-day Simple Moving Average (SMA).
Again, this indicator is a simple yet effective way of identifying price action. It is also flexible and available to everybody. You can add the flavor you want to use, depending on the market you are trading in.
Why is momentum important?
Because price is usually reflected in the momentum in which it is going but the intersecting lines of the oscillator can help signal a reversal in the market trend. If you’re aware of the markers then tweaking your trades can help increase your profits.
An example is seeing a divergence between the oscillator and trending price. If the bearish trend reaches a new lower low but the Stochastic oscillator stops at a higher low, it’s quite possible that a bullish reversal is setting up for a run.
Disclaimer
Content provided by CryptoTraderNews is for informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. All information is of a general nature. As always, there is risk with any investment. In exchange for using our products and services, you agree not to hold CryptoTraderNews Pro, its affiliates, or any third party service provider liable for any possible claim for damages arising from decisions you make based on information made available to you through our services.
Stochastics also makes a lot of sense in terms of what it is visualizing and what it is showing and how you can implement them in your trading. The goal of trading is to bring the boundaries in and creating the rules based on a completely free time range and setting where you will get involved.
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