In cryptocurrency trading, EMA, MACD, and RSI are commonly used technical indicators, and their combined use can help assess trends, momentum, and timing for buying and selling. The following are their core analysis methods and collaborative application strategies:
1. EMA (Exponential Moving Average)
Function: More sensitively reflects trend changes by weighting recent price data.
Common Parameters:
Short-term EMA: 7-day, 12-day (to capture short-term trends).
Long-term EMA: 26-day, 50-day, 200-day (to determine medium to long-term trends).
Analysis Method:
Golden Cross: Short-term EMA crosses above long-term EMA → Bullish signal (e.g., 7EMA crosses above 26EMA).
Death Cross: Short-term EMA crosses below long-term EMA → Bearish signal.
Price relative to EMA:
Price above EMA → Uptrend;
Price below EMA → Downtrend.
Applicability of Cryptocurrencies:
Effectively significant in strong trending markets (e.g., Bitcoin bull market), but may frequently fail in sideways markets.
2. MACD (Moving Average Convergence Divergence)
Composition:
DIF Line (Fast Line): 12EMA 26EMA.
DEA Line (Slow Line): 9-day EMA of DIF.
Histogram: DIF DEA, reflecting momentum strength.
Analysis Method:
Signal Line Cross: DIF crosses above DEA → Buy; crosses below → Sell.
Zero Axis Boundary:
MACD > 0 → Bull market;
MACD < 0 → Bear market.
Divergence:
Price makes new highs but MACD does not make new highs → Top divergence (reversal risk);
Price makes new lows but MACD does not make new lows → Bottom divergence (rebound signal).
Note: Cryptocurrencies are highly volatile, MACD should be combined with other indicators to filter false signals.
3. RSI (Relative Strength Index)
Function: Measures price overbought/oversold conditions, typically with a parameter of 14 days.
Key Levels:
Overbought Zone: RSI > 70 → Potential pullback;
Oversold Zone: RSI < 30 → Potential rebound.
Analysis Method:
Trend Confirmation:
RSI above 50 → Bulls dominate;
RSI below 50 → Bears dominate.
Divergence: Indicates reversal when price moves contrary to RSI.
Failure Swing (applicable to cryptocurrencies):
Overbought zone RSI breaking below 70 after a failed rebound → Sell;
Oversold zone RSI breaking above 30 and pulling back without breaking → Buy.
Note: In extreme market conditions, RSI may remain overbought/oversold for a long time (e.g., Bitcoin bull market RSI > 80 can still persist).
Comprehensive Application Strategy
1. Trend + Momentum Combination:
EMA confirms direction: Price > 200EMA and short-term EMA golden cross → Bullish trend.
MACD verifies momentum: DIF above the zero axis and histogram expands → Trend strengthens.
RSI filter entry: Buy when RSI rebounds from the oversold zone above 50.
2. Reversal Trading:
Price makes new highs but MACD/RSI shows top divergence + EMA death cross → Consider taking profit or shorting.
3. Sideways Market Adjustments:
If there is no obvious trend in EMA, prioritize trading in RSI overbought/oversold intervals.
Cryptocurrency Considerations
High Volatility: Indicator signals may frequently occur, need to filter noise with larger time frames (e.g., 4 hours/daily).
Impact of Sudden News: Technical indicators may suddenly fail due to policy, hacking events, etc., stop-loss should be set.
Liquidity Differences: Mainstream coins (BTC/ETH) indicators are more reliable, altcoins are easily manipulated.
It is recommended to validate strategies through backtesting and to use tools such as trading volume, support and resistance levels to improve win rates.
