Intro

If you have traded cryptocurrency, you know crypto trading technical analysis is a key part of your success. Whether you are day trading cryptos or swing trading crypto, crypto technical analysis is an integral part of crypto trading. Technical indicators help crypto traders determine market conditions and make buy and sell decisions accordingly.

Let’s explore the most popular crypto technical analysis indicators crypto traders use today.

Common Indicators

Moving Averages

The MA indicator shows the average price over a specific period of time. These averages smooth out the price action to show the underlying trend, force trends to persist, and identify potential reversals by looking for crossovers between moving averages of different lengths.                

As long as the shorter-term moving average stays above the longer-term average, it signals that prices are rising. When the shorter-term average crosses below the longer-term moving average, it signals that prices are falling.

MACD (Moving Average Convergence Divergence)

The MACD is a trend-following momentum indicator based on moving averages that can help crypto traders identify trends, estimate support and resistance levels, and determine entry and exit points. The MACD turns two trend-following indicators into a centerline or trigger line. Crypto traders can then compare that centerline with the price of crypto to see if there’s convergence or divergence between them.

Bollinger Bands

Developed by John Bollinger in the 1980s, this indicator consists of three bands: an upper band at an arbitrary number above the crypto’s price, a lower band at an arbitrary number below the crypto’s price, and middle or “standard” band between these two bands.

The standard deviation is typically used to calculate both of the outer bands; crypto traders can use it as well. Bollinger Bands are actually composed of volatility channels (bands) with different widths, but crypto traders normally use the default 20-day simple moving average (SMA) for simplicity.

Fibonacci Retracement

The Fibonacci sequence is a series of numbers identified by 8th-century mathematician Leonardo Fibonacci. They are derived from the mathematical constant known as phi, which has a numerical value of 1.618. Crypto traders use these ratios to identify potential support and resistance levels in crypto trading.

There are five ratios used most commonly by crypto traders: 23.6%, 38.2%, 50%, 61.8% and 100%. Trend lines constructed using these levels are thought to be very strong with very little risk of breaking down below or above them.

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is an oscillator used in technical analysis to measure the speed and change of crypto price movements.

RSI oscillates between zero and 100. Traditionally, when the crypto is overbought (above 70), it signals a possible reversal; conversely, when crypto is oversold (below 30), it suggests an upcoming reversal.

A bullish/bearish divergence in RSI occurs when the price makes new highs (peak) or lows (trough) but the RSI does not confirm the move.

Summary

Crypto trading indicators help traders see where crypto prices are headed and determine whether to buy or sell crypto. Looking at the crypto technical analysis tools above and other indicators that crypto traders use can help you stay on top of market conditions and make better crypto trading decisions.

Learning about crypto technical indicators is just one step toward becoming a successful crypto trader.

While technical analysis can be extremely helpful in crypto trading, this type of analysis is not 100% reliable, which means it’s important for crypto investors to use as much information as possible

Knowing how to read crypto trading charts and identifying the different crypto technical analysis tools can help you make better investment decisions. By having a good grasp of crypto technical analysis, you should be able to increase your odds of success in crypto trading.