How to use technical indicators for trading in cryptocurrencies
Swing Trading is a popular investment strategy that includes the use of technical indicators and graph patterns to make informed decisions about the purchase and sale of cryptocurrencies. Although it is possible to use technical analysis as an independent indicator, it is necessary to understand how to combine it with other tools, such as cryptocurrency -specific indicators, to improve your business performance.
What are technical indicators?
Technical indicators are numeric values that show the result of different patterns and graph trends on a financial instrument such as cryptocurrencies. They help investors identify potential purchases or sales of signals, predict movement movements and make informed investment decisions. Common technical indicators used in crypto -trading include:
- Average diameters (ma): average security price for a certain period.
- Relative force index (RSI): measures the speed and change of prices moves to determine excessive or excessive conditions.
- Bollinger strips: Volatility -based indicator that brings two sliding diameters with added standard deviations.
- MACD (divergence of the convergence of the sliding diameter): closes the difference between two sliding diameters, indicating the relationship between purchase and sales pressure.
How to use technical indicators for trading in cryptocurrencies
Follow the following steps to effectively use technical indicators for trading in cryptocurrency:
1.
- Set your chart : Create a graph with the following settings:
* Time frame: 1 hour or 4-hour chart
* Candle type: closed, open, tall, low
* Indicators: Select your preferred indicators for each period and the level of detail.
- Identify trend patterns
: Look for trend lines, for example:
* Graph patterns (eg main and shoulders, inverse heads and shoulders)
* Line breaks or divergence
* Sliding diameters pass through or down
- Determine the condition of the excessively purchased/predecessed status : Use your indicators to identify when securing (above 80) or dedicated (below 20).
- Set the stop and profit levels : Determine your stops and profitable levels based on the risk management strategy.
6.
Example: Using RSI as an indicator of rocking trading
Relative power index (RSI) is a popular technical indicator used to measure excessive or excessive conditions in cryptomis such as BTC and ETH. Here is an example:
| RSI time frame (14) RSI (28) |
| — | — | — |
| BTC (1 hour chart) 30 | 70 |
| BTC (4-hour chart) 40 | 60 |
In this example, the RSI value suggests that the BTC is bred to 70 and sells for 40 years. This suggests that you should sell or wait for a break of over $ 6,000 before buying.
More tips and considerations
1.
- They are just one tool in Investor’s Toolkit.
- Focus on trading volume : Monitor trading in order to find that the rate of demand and potential support or level of resistance.
4.
Conclusion
Technical indicators can be a valuable tool in trading in swinging for cryptocurrencies such as bitcoins and ethereum. Combining them with other tools, such as graph formulas and market sentiment analysis, you can develop a more informed strategy for profitable trades.
