Cryptocurrency prices can be unpredictable and hard to predict, yet there are various techniques you can use to make informed trading decisions – candlestick charts and volume indicators being two such ways of helping.
When making decisions regarding cryptocurrency trading volume is also an indicator of buying or selling pressure.
Candlesticks
Candlestick charts can be invaluable tools for crypto traders as they provide much more data than simple line charts. A candlestick chart displays open, close, high and low prices of cryptocurrency assets within a certain time period as well as featuring “wicks,” thin lines that extend from its body into space above and below it.
Candlestick patterns can indicate potential upward or downward price movements for assets. Traders look for bullish candlestick patterns which suggest rising prices while bearish ones indicate potential decreases.
Candlestick patterns such as doji’s, shooting stars, hammers and engulfing candles are often used to detect price reversals in strong trends. While candlestick patterns alone should not be relied upon when trading, traders should still avoid taking trades based solely on them.
Moving averages
Moving averages are an invaluable tool in crypto trading analysis. They allow traders to identify price trends and pinpoint favorable entry prices while attenuating sudden price spikes and drops, thus helping traders minimize unexpected price swings and drops. Furthermore, moving averages can often be combined with other indicators in order to minimize false signals and maximize accuracy.
Candlestick charts can provide an effective means of analysing cryptocurrency price movements over a set time period, such as four hours. Each candlestick represents market activity during that time and features either green (increase) or red (decline) candlestick bodies to indicate market activity during that period. Furthermore, the On-Balance Volume indicator offers further analysis for cryptocurrency trading analysis.
Cryptocurrencies offer traders a way of quickly recognizing trends by analyzing historical data and forecasting future performance, but their market remains unpredictable, often swinging wildly without warning.
RSI
RSI is a momentum indicator used to analyze price fluctuations. It takes the form of a line graph oscillating between two extreme values from 0 to 100 and allows traders to easily identify trends in cryptocurrency trading and develop trading strategies accordingly.
However, traders should remember that RSI can give false signals in trending markets. For instance, crypto markets often continue their upward trajectory even after an overbought indicator such as RSI has indicated it. Therefore, traders should utilize other indicators such as OBV (On Balance Volume). This tool uses both buying and selling volume of an asset to evaluate market sentiment overall.
MACD
MACD is a widely-used technical indicator in crypto trading and can help traders detect trend reversals more accurately than other tools alone. A MACD bearish crossover signals that an imminent downtrend will occur and provides traders with an ideal selling opportunity, particularly when combined with other reversal signs.
MACD can help traders create an effective trading strategy by monitoring its signal line and histogram. Switching timeframes may generate more signals; however, due to market noise they could also produce false ones; selecting the most suitable timeframe depends on your trading goals, risk tolerance, and preferred trading style.
Relative strength indicator
Relative Strength Index (RSI) is a momentum indicator created by J. Welles Wilder to assess price movements and changes over time. Typically, it indicates overbought conditions when rising above 70 and oversold ones when falling below 30, though traders can easily alter its settings to suit their trading strategy.
Traders can also use the Relative Strength Index (RSI) to detect failure swings, which occur when an indicator oscillates around overbought or oversold levels, giving a good indication that a trend might soon reverse; but be wary that even after an overbought/oversold condition has been detected by an RSI signal, additional trends may continue.
