Crypto trading analysis is a statistical trading strategy that uses indicators to predict future market movements and make informed trading decisions. It often comes together with news and sentiment analysis for optimal trading decisions.
Ichimoku Cloud is a technical analysis tool used in cryptocurrency trading that helps traders detect possible trend reversals and support/resistance levels. The Ichimoku Cloud comprises five lines – Tenkan-sen, Kijun-sen, Senkou Span A&B, and Chikou Span.
Bollinger bands
Bollinger Band trading strategy is an effective tool for identifying momentum and volatility. Based on Relative Strength Index, this indicator should be combined with other tools, such as volume-based indicators to reduce false signals. Due to its susceptibility to false readings when used alone, however, using other indicators as part of your arsenal is recommended for optimal use of Bollinger bands indicator.
John Bollinger introduced the Bollinger bands for stock analysis in the 1980s, and they have become a widely used price analysis tool since. Their middle band represents a simple moving average, while upper and lower bands are set two standard deviations above and below this line respectively. When prices touch either the upper band during a rally, this indicates plenty of strength that could continue. When prices touch either lower band, however, it indicates weakness which could reverse that rally.
OBV
OBV (On-Balance Volume) indicator is a technical analysis tool that uses volume flow to anticipate asset price fluctuations. As it’s cumulative indicator that adds volume when prices rise and subtracts it when they decline, the OBV indicator could serve as a warning sign if price of an asset makes new highs but OBV fails to reach that mark, signalling possible trend erosion.
Traders use this indicator to spot potential trading opportunities. An increasing OBV suggests more buyers are purchasing assets at current prices; conversely, a declining OBV suggests sellers are pushing down prices.
OBV may not be an efficient trading indicator when plotted on shorter time frames due to increased noise from increased asset price volatility and false signals that result from this. Therefore, traders should look to combine other indicators with OBV in their trading decisions.
Moving average convergence divergence
Moving average convergence divergence (MACD) is a trend-following momentum indicator composed of two exponential moving averages. It comprises the MACD line and signal line calculated using the MACD formula (12-day closing prices minus 2-day closing prices and 9 period exponential smoothed moving average of MACD line). Finally, its histogram shows differences between MACD line and signal line with positive bars located above zero line and negative ones found below it.
MACD is a lagging indicator, meaning it lags pricing events by some period. Therefore, it should only be applied to trending markets as opposed to ranged ones and its accuracy relies heavily on how its interpretation and application occurs; when used incorrectly it may lead to false signals and cause unprofitable trades.
Candlesticks
Candlesticks graphically display price movements and can provide traders with invaluable information about the state of the market. Candlestick patterns may help traders predict future price movements and make trading decisions; however, when used to make predictions and decisions they should always be seen within context with other indicators and the overall trends within a market.
Doji patterns with small bodies and long upper wicks signal market uncertainty; while dragonfly doji patterns with large bodies and short upper wicks indicate bullish sentiment.
Cryptocurrencies trade 24/7 and produce an immense amount of data, which can be daunting for traders. However, there are many tools that can help simplify and recognise patterns to make more informed trading decisions – this includes Bollinger bands, moving averages and RSI. They can also be used alongside candlestick charts to identify key support and resistance levels as well as multiple timeframe charts which provide a broader overview of the market.
