Essential Indicators to Pay Attention to In Crypto Trading

With crypto trading, you have more power because you can use various trading indicators. With the high volatility of cryptocurrencies, it might be hard to predict price movements accurately without doing technical analysis or fundamental analysis on your own.

But that doesn’t mean indicators don’t work in crypto trading. You just need to know how to pick the right indicators and what strategy to use together with them.

We will show you some of the indicators that can help in crypto trading. It’s up to you to use them properly on, just like in the stock market.

1. Relative Strength Index (RSI)

The RSI is one of the most common time frame indicators that show you when it’s the right time to buy and sell cryptocurrencies. It calculates the size of your current gains against your losses which helps you decide when to enter or exit a trade.

The RSI oscillator is placed above and below the zero line. When it’s green, it means you should go long on the cryptocurrency because it’s currently stronger than its normal state. On the other hand, traders are advised to go short on cryptocurrencies that are in the red as they’re showing weak signs.

The RSI oscillator is also used to show the overbought and oversold conditions for a cryptocurrency. If it’s above 70, it’s considered overbought, which means the market might be exhausted. On the other hand, if it’s below 30, it’s an indication that the market could reverse soon or may even go up again.

RSI is moving within the range between 0 and 100, so you shouldn’t look at just one indicator for short-term trading. If it goes beyond that, then there might be changes in the market which you need to carefully monitor.

2. Bollinger Bands

The Bollinger Bands show volatility similar to the RSI indicator. However, they use a wider range compared to the RSI which makes it more effective in showing volatility.

The Bollinger Bands consist of three lines: 2 upper bands with an average distance and 1 lower band with an average distance. The price often moves between the two bands when there are no big changes in the market. However, if the price goes outside the upper band and it’s still in a downward trend, then this indicates that there might be volatility soon which will affect your trading.

It also works in the opposite way: when it exceeds over the lower band and is in an upward trend, then it could mean that there are no more chances to take a profit and you should prepare for the next opportunity.

3. On-Balance-Volume (OBV) indicator

The OBV indicator is another time frame oscillator that can be used to determine when it’s the right time to buy or sell cryptocurrencies. It shows whether there are strong buyers or sellers in the cryptocurrency market at any given period.

The on-balance volume (OBV) adds the running total of positive and negative volumes together. The resulting figure is shown as a single line that moves above or below the zero level when there are increased levels of buyers or sellers in the market.

Generally, OBV’s tendency to go up means that there are more buyers than sellers which can signal a bullish move. On the other hand, a downward movement means that there are more sellers than buyers which could mean a bearish move is coming soon.

Closing Thoughts

There are also other indicators that can be used by traders to determine when it’s the right time to buy or sell cryptocurrencies. These ones mentioned above, work best for most traders. We find them effective in trading both short-term and long-term cryptocurrency trends. You should remember that no indicator is perfect so you still need to do your own research and analysis before making a decision to buy or sell cryptocurrencies.