Best indicators for crypto trading

Fibonacci Retracement

This indicator is based on retracements (periods when the price goes against the trend, then it moves back along with the trend direction). These movements endure for short periods. The Fibonacci retracement uses numbers pointed out by a mathematician in the 13th century.

The indicator helps predict entry and exit points and whether you should go long in the market or sell. Assets’ prices will likely turn toward the trend tendency when they reach certain Fibonacci retracement levels. You can set up the Fibonacci indicator levels to find out signals for a possible reversal and open a position the same tendency as the primary trend.

Fibonacci trading strategy means searching entry points at the retracement and waiting for the price to move back in the direction of the initial trend.

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The large movement is referred to as a breakout.

You must trade when the first breakout occurs after a squeeze or when the first candlesticks escape. When the breakout is above resistance, purchase your chosen cryptocurrency and sell it later. if the breakout is below support or when the cryptocurrency’s price continues to drop, you must sell to buy later.

  • Bollinger Band: Support and Resistance.

Like traditional resistance and support patterns, the upper part of the Bollinger Band acts as resistance while the lower part acts as a support. To put it simply, you must sell at the higher resistance and purchase cryptocurrencies at the lower support.

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This indicator oscillates between above and below the centerline as the moving average diverger, converge, and cross. The shorter moving average is responsible for almost all of MACD movements while the longer moving average is slower than the shorter moving average. The latter is less reactive to the difference in the cost of an asset in the underlying security.
Therefore, since MACD is unlimited, it is ineffective in identifying oversold and overbought levels.

How to Profit Using MACD Indicator?

Using MACD indicator, you can experience three instances in which you can make a profit from trading calls

  1. Purchase signal confirmation when you see a positive divergence.
  2. Sell signal confirmation when the divergence is negative.
  3. Share prices are rising if the indicator is above the zero line.

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Several examples of Fibonacci Retracement levels usage in crypto trading below:

Trend Lines

Trend lines are lines that are drawn in the price chart through price peaks. These lines are usually treated as support and resistance levels. If there is more than one trend line in a chart, they could form various patterns such as tunnels, triangles, flags and others.

Those patterns are commonly used by traders in larger timeframes (like 1h or daily chart).

Since there are few rules on how these lines should be drawn, this indicator is very speculative. Meaning that opinions on the same charts could differ from trader to trader. It is an interesting and creative way of looking in the crypto market.

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Let’s take a look at a trade using our second best crypto indicator known as the Relative Strength Index.

Here, we have an example of a trade starting from the other direction, where I have been holding ETH while the market has been in a sideways direction (the first black arrow on the left). The massive green candle broke the sideways trend which could indicate the market is breaking out into a bullish trend, but we also see that the RSI indicates it has become immediately overbought. As the RSI has crossed over 70 this is an indication that the market is overbought.
I can now expect that this breakout will most likely turn out to be a fakeout.

As a result, once the big bullish candle closed I aggressively placed a SELL order and was able to sell at the 229.50 mark. The next candle closed lower, meaning that my expectations of a fakeout were further confirmed.

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Moving averages could be used as stop-loss or target levels as well.

Some examples of moving averages usage in crypto trading bellow:

SMA 100 as support level:

FAQ

What are crypto trading indicators?

There are no specific indicators for crypto trading. Crypto market has the same market psychology as any other financial market. So, any indicator that is used for stocks, commodities or other financial instruments could be applied to crypto as well.

Traders in crypto markets tend to use traditional indicators such as moving averages, trend lines, RSI, MACD and others.

How to create a trading strategy?

It is important not to forget that most indicators will not be profitable on their own.

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In this case we need to find a confirmation candle and put a stop loss below reversal point.

Near support or resistance levels we are used to seeing larger volumes as well. Once again large volume alone does not mean anything. It is more important to look for confirmation candles.
In the following example we can see where price reaches support and resistance level, volume goes up. After that a confirmation candle shows where commodity price could go next.

Bollinger Bands

Bollinger Bands indicator is three lines setup. Middle one is a simple moving average, upper and lower lines show standard deviations from SMA.

Contrary to many traders believe BB do not show overbought and oversold zones. Standard deviation shows volatility of the market. So, if upper and lower bands are closer this means low volatility and vice versa.

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It helps more accurately find out the tendency of the trend. 2 indicators with 15 and 30 candles intervals give you the most accurate prediction. EMA depends on the past prices which means the indicator is lagging, that is why it’s called lagging. And it can’t predict anything, but help set the tendency of the trend.

If both averages go up, the trend is up. Down means descending. The crossing of two EMA confirms the direction of the trend.

The gap between 2 EMAs points to the force of the price movement – volatility. The stronger the price range, the wider the gap. What, most likely, will reduce (or even stop) the growth.

MACD

MACD is a Moving Average Convergence-Divergence Indicator.

It’s one of the most widespread momentum-based technical indicator. MACD shows the impulse of trends, regarding the correlation between two moving averages.

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Which do get overlooked when analysts break down the long-term trends of the industry. Furthermore, when trading cryptocurrency off an hourly chart you can use these indicators for any market trend. It doesn’t matter if it is bearish or bullish. This is interesting even if you plan to be a long-term Ethereum or Altcoin holder.

As markets do go through periods of being stagnant – where you will question your long term investment decision.

On the other hand, if you monitor charts with smaller time-frames then you can make endless profitable trades. Because there are always price movements at smaller time frames. Remove emotions, and trade the chart.

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Best technical indicators for crypto trading

The Fibonacci Retracements are 23.6, 38.2, 61.8, 78.6 and 50, which is technically not a Fib level, but is still used in trading.

Fibonacci Retracement levels act like support, resistance levels for stop-loss or take-profit goals. Levels on their own shows how much the price retraced after reaching a peak. So, when the price of crypto tests but do not break Fib level it means trend continuation.

Therefore, breaking key levels such as 50 and 61.8 could mean the end of the trend.

How to use Fibonacci Retracement in trading?

When prices are near Fibonacci Retracement levels, traders are looking for confirmation whether the level will hold or not. For example, high volume near level and big candle towards previous peak could mean that level holds. On the other hand, small volume and small bounce from the level would not be considered as trend continuation.

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When the MACD slopes downward and crosses the signal line and heads below it, it is known as a bearish cross and this can be interpreted as a good time to sell.

RSI

RSI is used to indicate the weakness or strength of an asset through recent changes in its price, from which it can be evaluated if an asset has been overbought or oversold. This is how you calculate it:

RSI = 100 – 100 / (1 + RS)RS = Average of periods which close up in price / Average of periods which go down in priceNormally the number of periods used is 14, but it is entirely up to the trader how many to use.

Generally, if the value is under 30, it indicates the asset has been oversold.

Advantages Of The 1 Hour ETH Chart

First let’s take a look at this weekly chart ETH/USDT chart:

You can definitely see 2020 started with upwards momentum, but to make profitable trades watching a weekly chart, you need to be able to catch the brief spikes – such as the top in February. And those brief spikes are hard to catch, aren’t they? Now, let’s take a look at a 1 Hour ETH/USDT chart:

Looks much more interesting, right?

As you can see, 2020 Ethereum price movements may look like it has only had one upwards movement to those who place their trades only looking at the long-term picture. The 1H chart is painting a different picture.

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