Technical indicators forecast the direction of asset prices based on the asset volume and past market prices. To improve your prospects of success, there are a couple of technical indicators that can come in handy. As such, some of the most reliable technical indicators for crypto trading are MACD (Moving Average Convergence Divergence), RSI (Relative Strength Index), OBV (On-Balance Volume), and Bollinger Bands. Read on to know more about the indicators, and then click here to find the platform that can simplify the indicators for you.
Moving Average Convergence Divergence
MACD indicates the momentum of following trends. Here’s how it is calculated:
- 26 period Exponential Moving Average – 12 period Exponential Moving Average (at the closing price)
When the MACD remains positive, it indicates an upside momentum. On the other hand, when it slopes upward at the signal line and crosses it, the phenomenon is called a bullish cross. You can interpret it as a good time to purchase.
Similarly, when the MACD becomes negative, it indicates a downside momentum. As it slopes down, crosses that signal line, and goes further below, it’s called a bearish cross, which is a good time for you to sell.
Relative Strength Index
RSI indicates the strength of an asset through the recent price changes, which shows if the asset has been oversold or overbought. The formula for calculating RSI is:
RSI: 100 – 100 / (1 + RS)
RS: The average of all the periods that close up in price / The average of all the periods that go down in price
Usually, 14 is the number of periods utilized, though the trader can decide the number as necessary. Also, a value below thirty typically indicates an oversold asset. On the other hand, a value over seventy generally indicates an overbought asset.
Bollinger Bands refer to an indicator useful in determining the movements of the asset price in a band by letting the width of the lower and upper bands move along with the price fluctuation. Here’s how Bollinger Bands are interpreted:
- Middle Band: Simple Moving Average over 20 days (SMA)
- Upper Band: Simple Moving Average over 20 days + (Standard price deviation for 20 days x 2)
- Lower Band: Simple Moving Average over 20 days – (Standard price deviation for 20 days x 2)
On Balance Volume
OBV is the indicator using the volume flow of assets for predicting price changes and determining the strength of signals to sell or purchase an asset. It’s a cumulative indicator, which means:
- When asset prices close up, the volume is added to the total of the OBV.
- When asset prices close down, the volume is subtracted from the total of the OBV.
- When asset prices remain the same, there are no calculations.
In case you note a higher high (with the exception of a resistance zone), it indicates a positive volume pressure. This means that the prices might increase.
Though it is important to have some knowledge about the technical indicators yourself, make sure to use an app like Bitcoin Loophole for an unbiased and precise technical analysis.