If you are already familiar with the basics of trading on Binance and want to enhance the effectiveness of your trades, it's time to delve into technical analysis - a powerful tool that helps understand when it's best to enter and exit positions.
What is technical analysis?
Technical analysis is a method of evaluating cryptocurrency based on historical data on price and trading volumes. Unlike fundamental analysis, which studies news and economic factors, technical analysis relies on charts and indicators to predict future price movements.
Key indicators for advanced traders
1. RSI (Relative Strength Index) - Relative Strength Index
RSI shows how overbought or oversold an asset is. RSI values range from 0 to 100:
• RSI above 70 - the asset is considered overbought, a price pullback may occur.
• RSI below 30 - the asset is oversold, a reversal upwards may occur.
Use RSI to find market reversal points and avoid entering trades at the peak.
2. MACD (Moving Average Convergence Divergence) - Moving Average Convergence Divergence
MACD helps determine the direction of the trend and moments of trend reversal. It consists of two lines:
• MACD line
• Signal line
When the MACD crosses the signal line from bottom to top - this is a buy signal. Crossing from top to bottom - a sell signal.
3. Trading volumes
Volume shows how many coins were bought and sold over a certain period. An increase in volume during a price movement confirms the strength of the trend. If the price is rising but the volume is falling, the trend may be weak and could change soon.
How to use these indicators together?
• Combine RSI and MACD to confirm signals. For example, if RSI indicates oversold conditions while MACD gives a buy signal - this is a strong reason to enter a trade.
• Watch the volumes: confirm indicator signals with increasing volume.
• Do not rely on a single indicator - always analyze comprehensively.
How to set up indicators on Binance?
In the Binance app or web version:
1. Open the chart of the desired cryptocurrency.
2. Click the 'Indicators' button (chart icon with lines).
3. Select RSI and MACD from the list.
4. Pay attention to the volumes under the chart - they are displayed automatically.
Tips for successful application
• Use technical analysis in conjunction with news and fundamental factors.
• Test strategies on demo accounts or with small amounts.
• Don't forget about risk management - set stop-losses.
Technical analysis is a skill that develops with practice. Start applying RSI, MACD, and volumes today, and you will notice how your trades become more informed and profitable!
If you want, in the next posts I will explain how to set up notifications and use other useful tools on Binance. Share your questions and experiences in the comments!