To determine an entry point using technical indicators, it is essential to understand how each indicator works and how to use it in the proper context. I will explain to you some basic indicators that can be used to identify entry points with examples and images.
1. Moving Average Indicator
What is it?
The moving average is an indicator that tracks the average price of an asset over a certain period of time. There are two main types:
- Simple Moving Average (SMA): Calculates the simple average of closing prices over a specified time period.
- Exponential Moving Average (EMA): Gives more weight to recent prices, making it more sensitive to recent movements.
How do you use it?
Moving averages can be used to identify entry points through their crossover:
- Bullish Cross (Golden Cross): Occurs when a short-term moving average (like 50 days) crosses above a long-term moving average (like 200 days). This is usually a buy signal.
Bearish Cross (Death Cross): Occurs when a short-term moving average crosses below a long-term moving average. This is considered a sell signal.
Example:
If you are trading the BTC/USDT pair and used the 50 and 200 moving averages:
If the 50-day moving average crosses above the 200-day moving average, you can enter a buy trade.
2. Relative Strength Index (RSI)
What is it?
RSI is a momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100, and is typically considered overbought when RSI is above 70, and oversold when RSI is below 30.
How do you use it?
Buy: If the RSI drops below 30 and then starts to rise again, this may be a signal that the price will begin to increase.
