1. Core Technical Indicator Classification and Practical Usage.
1. Trend Indicators: Determine the direction of short-term trends.
Moving Average (MA/EMA)
Usage: Focus on EMA12/EMA26 (simulating MACD fast and slow lines) or 5/10/20 day moving averages for short-term trading.
When the price stabilizes above the short-term moving average (like EMA12) and the short-term moving average crosses above the long-term moving average (like EMA26), it is considered a bullish signal; conversely, it is a bearish signal.
Case Study: Price breaks through EMA50 on the 1-hour chart and confirms support on the pullback, serving as an entry point for a short-term long position.
Note: EMA reacts more sensitively to price, suitable for volatile markets; MA is more stable, suitable for clear trending markets.
Bollinger Bands
Usage: The upper band is a resistance level, the lower band is a support level, and the middle band is a short-term trend line (usually EMA20).
When price breaks above the upper band and closes firmly, it may initiate an upward trend; breaking below the lower band may lead to a downward trend.
Range Market Strategy: Go long when price touches the lower band and rebounds, go short when it touches the upper band and falls back, with stop loss set outside the bands.
Trendy Market Strategy: Operate in the direction of the middle band, if the price moves upward along the upper band, only go long, and stop loss if it breaks below the middle band.
2. Oscillation Indicators: Capture Entry/Exit Timing.
Relative Strength Index (RSI)
Usage: Overbought and Oversold: RSI > 70 indicates overbought, possible pullback; RSI <30 indicates oversold, possible rebound.
Divergence Signals: When price makes a new high but RSI does not, it indicates a top divergence; when price makes a new low but RSI does not, it indicates a bottom divergence.
Practical Skills: In a clearly trending market (like a bull trend), only look for long opportunities when RSI = 40-50 (bullish pullback support zone), avoiding counter-trend buying in the oversold zone.
Moving Average Convergence Divergence (MACD)
Usage: Golden Cross / Death Cross: When the DIF line crosses above the DEA line, it is a golden cross (bullish), and vice versa is a death cross (bearish).
Momentum Bars: Red bars enlarging indicate strengthening bullish momentum, red bars shortening require caution for reversal; green bars behave oppositely.
Zero Axis Signal: A golden cross appearing above the zero axis (bullish strong zone) is more reliable, while a death cross appearing below the zero axis (bearish strong zone) is more effective.
Top and Bottom Signals: When price and MACD show a top divergence (new price high, but MACD does not reach a new high), the probability of a short-term peak is extremely high.
Stochastic Oscillator
Usage: Composed of the K line (fast line) and the D line (slow line), with a value range of 0-100.
Candlestick breaking through the D line and the value <20 is a golden cross (buy in oversold area); Candlestick falling below the D line and the value > 80 is a death cross (sell in overbought area).
Used in conjunction with RSI to filter out invalid signals (e.g., RSI<30 and Stochastic golden cross, enhancing the credibility of bullish signals).
3. Volume Indicators: Validate Price Signals.
Volume Usage: When price breaks through a key resistance level, it should be accompanied by increasing volume (e.g., more than 1.5 times the 20-day average), otherwise, it may be a false breakout.
Volume Decrease during Upward or Downward Movement (Volume-Price Divergence) suggests that the trend may reverse; if the price makes a new high but volume shrinks, be cautious of a pullback.
Case Study: If the price breaks below the lower band of the Bollinger Bands on the 1-hour chart while volume surges, it may form 'panic selling', increasing the probability of a subsequent rebound.
2. Multi-Indicator Resonance Strategy: The key to improving win rates.
1. Bullish Signal Combination (taking the 1-hour chart as an example).
Trend Confirmation: EMA12 > EMA26, price operates above the middle band of the Bollinger Bands, confirming a short-term bullish trend.
Entry Timing: RSI rebounds from the oversold zone (<30) to the 40-50 range, indicating that bulls are beginning to fight back.
MACD golden cross and red bars begin to enlarge, indicating strengthening momentum.
Volume shrinks during price pullbacks and expands during rebounds, confirming that the main force is accumulating positions.
Entry Point: Place a long position near the middle band of the Bollinger Bands (EMA20) or near EMA12, with the stop loss set below the lower band.
Target Level: Upper band of the Bollinger Bands or recent high, take profit can be combined with RSI overbought (>70) or MACD top divergence signal.
2. Bearish Signal Combination (taking the 4-hour chart as an example).
Trend Confirmation: EMA12 < EMA26, price operates below the middle band of the Bollinger Bands, confirming a short-term bearish trend.
Entry Timing: RSI falls from the overbought zone (>70) to the 50-60 range, indicating that bears are beginning to dominate.
MACD death cross and green bars begin to enlarge, indicating weakening momentum.
Price rebounds to the middle band of the Bollinger Bands and is met with resistance, forming a 'false breakout' pattern (like a shooting star candlestick).
Entry Point: Place a short position near the middle band of the Bollinger Bands or near EMA12, with the stop loss set above the upper band.
Target Level: Lower band of the Bollinger Bands or recent low, take profit can be combined with RSI oversold (<30) or MACD bottom divergence signal.
3. Risk Control: The lifeline of short-term operations.
1. Stop Loss Settings
Fixed Ratio Stop Loss: Each trade's stop loss should not exceed 1%-2% of account capital, e.g., for $100,000 principal, the single trade stop loss amount ≤ $2,000.
Technical Stop Loss: Long position stop loss set below recent lows or below the lower band of the Bollinger Bands (e.g., if the entry point is $103,000, and the recent low is $102,000, the stop loss could be set at $101,800).
Short position stop loss set above recent highs or above the upper band of the Bollinger Bands (e.g., if the entry point is $105,000, and the recent high is $106,000, the stop loss could be set at $106,200).
2. Take Profit and Position Management
Target Level Partial Take Profit: If the expected target is 500 points, take profit 50% of the position at 250 points, and the remaining position bets on trend continuation.
Dynamic Take Profit: After making a profit, move the stop loss to the breakeven line to avoid profit withdrawal; if the price continues to move towards the target, adjust the stop loss accordingly (e.g., move the stop loss up by 200 points for every 300 points of profit).
Position Control: No single trade should exceed 10% of total capital to avoid over-leveraging.