1. Exponential Moving Average (EMA)

Concept: A weighted calculation of prices, giving more weight to recent prices, making it more responsive to price changes than a simple moving average (SMA).

Calculation: Involves a smoothing factor (usually calculated based on the number of periods N).

Application methods in cryptocurrency trading:

Identifying Trend Direction:

Upward Trend: Price consistently operates above key EMAs (such as 20, 50, 100, 200 periods), and the EMA line itself is inclined upwards.

Downward Trend: Price consistently operates below key EMAs, and the EMA line itself is inclined downwards.

Choppy Market: Price repeatedly crosses above and below key EMAs, with the EMA line tending to flatten.

Determining Support and Resistance:

In an upward trend, shorter-term EMAs (such as 20, 50) often act as dynamic support levels, and price pullbacks may rebound.

In a downward trend, longer-term EMAs (such as 100, 200) often act as dynamic resistance levels, and price rebounds may face resistance.

Moving Average Crossover Strategy:

Golden Cross: Short-term EMA (such as 20) crosses above long-term EMA (such as 50 or 100). Typically regarded as a bullish buy signal, indicating that short-term momentum is starting to be stronger than long-term momentum, and the trend may reverse upward or accelerate.

Death Cross: Short-term EMA (such as 20) crosses below long-term EMA (such as 50 or 100). Typically regarded as a bearish sell signal, indicating that short-term momentum is beginning to weaken relative to long-term momentum, and the trend may reverse downward or accelerate downward.

Note: In a choppy market, golden cross/death cross signals are frequent and easily invalidated (false signals). It is necessary to combine these with other indicators or trend backgrounds for filtering.

Multi-Period EMA Combination: Observe multiple EMAs of different periods (such as 10, 20, 50, 200) simultaneously; their arrangement (bullish arrangement: short > medium > long; bearish arrangement: short < medium < long) can more clearly depict trend strength and hierarchical support/resistance.

2. Moving Average Convergence Divergence (MACD)

Concept: MACD consists of three parts:

MACD Line (Fast Line): Typically the 12-period EMA - 26-period EMA. Reflects the difference in short-term and mid-term momentum.

Signal Line (Slow Line): Typically the 9-period EMA of the MACD line. It serves as a smoothed version of the MACD line, used to generate trading signals.

Histogram: MACD line - Signal line. Visually displays the difference (degree of separation) between the two, reflecting acceleration or deceleration of momentum.

Application methods in cryptocurrency trading:

Identifying Trend Direction and Strength:

MACD Line > 0: Typically indicates that short-term momentum is stronger than mid-term, and the market is bullish.

MACD line < 0: Typically indicates that short-term momentum is weaker than mid-term, and the market is bearish.

MACD Line far from the 0 axis: Indicates that the current trend is strong.

Cross Signals (most commonly used):

Buy Signal: MACD line crosses up through the signal line (preferably occurring below or near the 0 axis, away from extreme areas).

Sell Signal: MACD line crosses down through the signal line (preferably occurring above or near the 0 axis, away from extreme areas).

Note: Be cautious of false signals in a choppy market.

Histogram Analysis:

Histogram Lengthening: Indicates that momentum is accelerating (upward acceleration or downward acceleration).

Histogram Shortening: Indicates that momentum is waning (upward weakness or slowing downward).

Histogram turns from negative to positive (or positive values expand): Bullish momentum increases.

Histogram turns from positive to negative (or negative values expand): Bearish momentum increases.

Top/Bottom Divergence (extremely important warning signals):

Top Divergence: Price makes a new high, but the MACD line or histogram fails to make a new high (or even declines). This suggests weakening upward momentum and is a potential reversal warning signal.

Bullish Divergence: Price makes a new low, but the MACD line or histogram fails to make a new low (or even rises). This suggests weakening downward momentum and is a potential reversal warning signal.

Note: Divergence signals require confirmation of price trends (such as breaking trend lines, key support/resistance levels), indicating possibilities rather than immediate actions.

3. Relative Strength Index (RSI)

Concept: Measures the speed and magnitude of recent price changes, assessing whether the market is in an overbought (possible pullback) or oversold (possible rebound) state. Typically fluctuates between 0 and 100.

Calculation: The ratio of average upward movement to average downward movement over a certain period (commonly 14).

Application methods in cryptocurrency trading:

Identifying Overbought and Oversold:

Overbought Zone: RSI > 70 (aggressive traders use 80). Indicates that the price has risen too quickly and sharply, and may face pullback or reversal risk. This is not a sell signal but a warning.

Oversold Zone: RSI < 30 (aggressive traders use 20). Indicates that the price has fallen too quickly and sharply, and may face a rebound or reversal opportunity. This is not a buy signal but a warning.

Note: In a strong trend (one-sided bull/bear market), RSI may operate in the overbought/oversold zone for a long time. Relying solely on overbought/oversold for reverse trading carries a high risk.

Application of the Midline:

RSI > 50: Typically regarded as bullish market dominance.

RSI < 50: Usually considered a bearish market dominance.

RSI crosses above 50: It may indicate a strengthening trend.

RSI crosses below 50: It may indicate a weakening trend.

Divergence Signals (also important):

Top Divergence: Price makes a new high, but RSI fails to make a new high (or even declines). Bearish warning.

Bullish Divergence: Price makes a new low, but RSI fails to make a new low (or rises). Bullish warning.

Note: RSI divergence is more reliable at the end of a trend and also requires price confirmation.

Pattern Analysis: The RSI line itself can also form technical patterns such as head and shoulders, double tops/bottoms, and their breakouts or breakdowns have significance similar to price patterns, potentially indicating future price trends.

Comprehensive Application and Strategy Building

Single indicators can easily mislead. Combining EMA, MACD, and RSI can provide a more comprehensive perspective and improve the reliability of trading decisions:

1. Trend Confirmation:

First, use EMA (especially multi-period combinations) to confirm the overall trend direction (upward, downward, choppy).

Observe whether the MACD line is above or below the 0 axis, whether the histogram is red or green, to assist in confirming trend and momentum.

Observe whether the RSI fluctuates around 50 or continues above/below 50.

2. Finding Trading Signals:

Trend Following Trading:

In an upward trend: Wait for the price to pull back to key EMA support levels (such as 20, 50), while observing whether RSI enters the oversold zone (or shows a bottom divergence) and whether the MACD histogram begins to shorten (indicating weakening downward momentum) or shows a golden cross. When two or three positive signals appear, consider buying.

In a downward trend: Wait for the price to rebound to key EMA resistance levels (such as 50, 100), while observing whether RSI enters the overbought zone (or shows a top divergence) and whether the MACD histogram begins to shorten (indicating weakening upward momentum) or produces a death cross. When two or three negative signals appear, consider selling or shorting.

Trend Reversal Warning:

When EMA shows a death cross/golden cross (especially long-term EMAs such as 50/200), and the MACD shows a strong divergence (histogram or MACD line), and the RSI also shows divergence and breaks key levels (such as 50 or trend lines), the likelihood of a trend reversal greatly increases. At this time, more precise price confirmation (such as breaking key neckline, trend line) is required.

3. Filtering False Signals:

When EMA shows no clear trend (choppy), the reliability of MACD and RSI crossover/overbought/oversold signals decreases, and trading should be approached with caution or avoided.

If the MACD shows a golden cross but the price remains below the main EMA (such as the 200-day line) and RSI is below 50, this golden cross may represent a weak rebound, and caution is required.

If RSI enters the overbought zone but the price is in a strong upward trend, and the MACD histogram continues to grow, the risk of shorting at this time is extremely high.

Important Notes (especially for cryptocurrencies)

Volatility: The cryptocurrency market is extremely volatile, and indicator signals may be quickly reversed, making stop-loss crucial.

Parameter Adjustment: Default parameters (such as EMA12/26/9, RSI14) are general settings. Traders should adjust parameters based on the characteristics of the traded cryptocurrency and the time period (minute, hourly, daily) to optimize results. Short-term traders may use shorter periods (such as EMA 10/20, RSI 9).

Time Period: The significance of indicator signals varies across different time periods. Signals on the daily chart are more reliable and impactful than those on the hourly chart. It is recommended to first observe the trends of larger time frames (daily, 4-hour) and then use smaller time frames (1-hour, 15-minute) to find entry points.

Not Universal: Technical indicators are based on historical data statistics and cannot predict sudden events (such as regulatory news, hacking attacks, or major players entering). Fundamental news and sudden events can instantly change the technical landscape.

Combining Other Tools: It is strongly recommended to combine volume analysis (to confirm the validity of breakouts/breakdowns), support and resistance levels (horizontal lines, trend lines, Fibonacci), candlestick patterns (such as engulfing, hammer, evening star) and market sentiment for comprehensive judgment.

Risk Management: The core of technical analysis is a probability game. Always use stop-loss orders to control risk. Do not overly rely on a single indicator signal.

Backtesting: Before applying any strategy in live trading, be sure to backtest using historical data to verify the strategy's effectiveness on specific cryptocurrencies and time periods.

Summary

EMA, MACD, and RSI are the three musketeers of cryptocurrency technical analysis. EMA provides trend framework and dynamic support/resistance, MACD reveals changes in momentum strength and potential turning points (divergence), and RSI measures short-term overbought/oversold states and momentum exhaustion (divergence). Mastering the principles and application scenarios of each indicator, and integrating them organically, while incorporating price action, volume analysis, and strict risk management, can enhance the quality and success rate of trading decisions in the unpredictable cryptocurrency market. Remember, there are no perfect indicators, only a deeper understanding of the market and more comprehensive response strategies.