Four Trading Indicators that can be used to Make Better Buy/Sell Decisions in the Crypto Market

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Four Trading Indicators that can be used to Make Buy/Sell Decisions in the Crypto Market

Nobody possess a total understanding of the direction money markets will go, whether up, down or sideways. No one really knows, the best anyone can do is to use current existing and historical data to predict whether the market will move in a certain direction.

Making this sort of data driven predictions relies a lot on analytic skills on the part of the trade/analyst and the proper usage of analytic tools help determine a possibly acceptable future price of a commodity in the market based on info derived from the analysis.

This sort of analysis in the finance/investing sphere is known as Technical Analysis(aka TA). TA, for short relies a lot on a specific set of tool known commonly as indicators.

Indicators are data provided on a chart showing the current and historical states of an asset in the market with the sole aim to help you make quality trading decisions.

Now, when it comes to the crypto market please note that you cannot make profits from your cryptocurrencies investment when you make wrong choices.

This guide explores four trading indicators that you can leverage to improve your decision making process in the market.

Moving Averages

Moving averages are indicators that are effective for illustrating the price action of a commodity/asset over a given period.

It is a lagging indicator that functions based on previous price action, and by lagging we mean that it is a type of indicator that only outputs data from events of the past and not the present set of events.

Moving averages can be grouped into two different types which are simple or exponential, depending on your trading style.

Short-term traders prefer to use the simple moving averages, while long-term traders prefer the exponential moving averages.

By taking advantage of the moving average slope, a trader can easily identify the signs of a trend.

When the slope is tilting upward, it can be said that the asset is in an uptrend or increasing in price and vice-versa when the slope is tilting downwards.

Relative Strength Index (RSI)

This indicator was developed by Welles Wilder about 40 years ago.

It helps traders to identify when the price of a cryptocurrency is too far above its true value.

Therefore, it enables a trader to make necessary changes before the market corrects itself and the price of the crypto falls back to its true value based on market sentiments.

Moreover, by taking advantage of the RSI, traders can navigate the volatile crypto market by realizing entry points.

This indicator uses a formula to detect when a cryptocurrency like Bitcoin is overbought or oversold.

Moving Average Convergence/Divergence (MACD)

The MACD is one of the most popular trading indicators in the Crypto market due to its simplicity and efficiency.

It is an indicator that shows whether the short-term price momentum is gravitating in the same direction as the long-term price momentum.

The MACD does not have an absolute range, unlike other cryptocurrency indicators. Therefore, it is not ideal for detecting when an asset is oversold or overbought.

So, it is always better to combine this indicator with others like moving averages when making trading decisions.

Volume

Volume is the amount of the asset that has been traded in the last twenty four hours.

It shows how many individuals are buying or selling a cryptocurrency.

A hefty volume shows that many people are buying an asset. Therefore, its price will keep rising.

Conclusion

A trader cannot afford to invest without having adequate knowledge of the market.

The volatile nature of the Crypto market demands that you are conversant with indicators to increase your chances of making profits.

So, take advantage of these indicators to smile more to the bank.

You can read more about technical indicators here