Cryptocurrency may be a high-risk investment, but it can make an excellent addition to your portfolio. Like any asset, cryptocurrency requires research and analysis before making your decision – the best way to gauge price movements is through reading cryptocurrency charts.
As an excellent starting point, consider looking at your moving averages: rising moving averages indicate potential buy signals while declining ones can indicate sell ones.
Bollinger Bands
Bollinger Bands can help cryptocurrency traders determine when the market has become overbought or oversold, using a moving average and standard deviation to form two bands: lower band represents oversold levels while upper band indicates overbought ones. They’re also useful in watching for double tops and bottoms by watching these bands; when prices move beyond an outer band but are then rejected back down towards it it may signal that a market shift may occur.
Bollinger Bands can also help identify trends. When prices are in an uptrend, their price should frequently touch the upper band; otherwise it could signal that this uptrend has lost strength.
Bollinger Bands should not be relied upon alone by traders as they cannot accurately predict price movements. John Bollinger suggests using it alongside tools that offer more direct market signals.
Moving Averages
Moving averages are an essential tool in crypto trading analysis, helping traders quickly identify trends without being overloaded by information. They depict a steady line of prices over an established timeframe (one minute, day, week month or year), providing traders with an accurate picture of support and resistance levels within cryptocurrency assets.
When the price of a cryptocurrency rises above its simple or exponential moving average, this indicates that buyers are outnumbering sellers – an indicator which allows traders to avoid selling opportunities in favor of buying opportunities.
Exponential moving averages (EMAs) are preferred over simple moving averages due to their increased emphasis on recent prices. Furthermore, other technical indicators, like Bollinger Bands can help traders make informed trading decisions more effectively.
Fibonacci retracement levels
Fibonacci Retracement Levels have long been one of the go-to tools for cryptocurrency traders, yet it’s essential to remember they should never be used on their own – they work best when combined with other types of technical analysis and price action indicators.
Additionally, when using these indicators it’s vital to identify the appropriate high and low points. Misidentifying significant prices could result in inaccurate retracement levels; additionally traders can get tunnel vision when relying on these indicators and make poor trade decisions as a result.
The Fibonacci numbers are derived from a mathematical ratio known as the golden ratio, found throughout nature and reflected in many aspects of existence. First discovered by Indian mathematician Acarya Virahanka around 600 A.D. and later refined by Leonardo Pisano Fibonacci (“Leonardo of Pisa”) during the 13th century.
On-balance volume
On-Balance Volume (OBV) is a leading indicator that allows traders to predict price movements based on asset volume. It is a straightforward technique which simply adds up positive days’ volume and subtracts negative days’ volume to show a cumulative total that can be plotted onto a chart as a trend line. The indicator can be used on its own or combined with other tools like trend lines and moving averages to provide predictive power.
Joseph Granville, the creator of this indicator, believed that volume was at the core of how financial markets worked and that price changes occurred due primarily to increased volume. When OBV of an asset experiences an unexpected spike, this often signifies price movement in tandem.
OBV indicates when large traders are investing in an asset, leading to price appreciation. Conversely, falling OBV indicates more sellers than buyers are present – one effective strategy when using on-balance volume is looking out for divergences between OBV and price movements.
