What indicators would be useful in crypto trading and what is their role?
In crypto trading (and technical analysis in general), technical indicators are mathematical tools applied to price charts to help traders make informed decisions. Here are some of the most commonly used indicators, along with their role:
đ 1. Moving Average (MA)
Role:Â Smooths out price fluctuations, providing a clearer picture of the overall trend.
SMA (Simple MA)Â : arithmetic average of the price over a period.
EMA (Exponential MA)Â : puts more emphasis on recent prices.
Useful:Â Identifying trends and entry/exit signals through intersections (e.g. "golden cross").
đšÂ 2. RSI (Relative Strength Index)
Role:Â Measures the speed and changes of price movements (momentum).
Values ââabove 70 = overbought asset.
Below 30 = oversold asset.
Useful:Â Signals of possible trend reversal.
đ 3. MACD (Moving Average Convergence Divergence)
Role:Â Combines two moving averages to detect changes in momentum.
Includes MACD line , signal line and histogram .
Useful:Â Detecting buy/sell signals based on intersections.
đ 4. Bollinger Bands
Role:Â Shows market volatility and possible support/resistance levels.
Consisting of a moving average and two bands (upper/lower) that expand based on volatility.
Useful:Â Identifying breakout or consolidation moments.
đ§Â 5. Volumes
Role:Â Confirms price movements.
High volumes = strong interest.
Divergences between volume and price can indicate reversals.
Useful:Â Checking the validity of trends and breakouts.
đ 6. Fibonacci Retracement
Role:Â Identifies potential support and resistance levels.
It is based on the Fibonacci sequence (23.6%, 38.2%, 50%, 61.8%, etc.).
Useful:Â Planning entries or exits in market corrections.
đĄ How to use them correctly:
Never rely on a single indicator.
Confirms signals through confluence (multiple indicators supporting the same hypothesis).
Adapt the indicators to your trading timeframe (scalping, day trading, swing).