Of course, it is a well-known fact that Cryptocurrency trading is now a tasty topic in the online space, as cryptocurrencies have grown in popularity over the years. Many people all over the world want to get involved and profit from investing in crypto assets. If you are one of these people, I mentioned in a previous post that crypto trading is packaged with a lot of risks, uncertainty, and volatility.
And this is why it is appropriate to have a concrete knowledge of the distinct ideas that can help you make informed trading decisions. The knowledge of fundamental analysis, technical analysis, and chart indicators, therefore, becomes a necessity for any trader or investor with profitability in mind.
So what’s your preferred technical analysis indicator? Do you have a favorite TA indicator that helps you trade profitably? Maybe you might want to vary your archive of trading indicators, sit tight and enjoy this piece.
I would love to share in this read, the top 3 Technical Analysis Indicators suitable for All crypto traders in 2023.
In several ways, these indicators have proven beneficial in helping crypto traders to trade and make profits without being caught in the web of crypto uncertainties and volatility.
What is technical Analysis and how can it be helpful to a crypto trader?.
Technical analysis plays a very significant role to make a profitable crypto trading journey. Crypto currency is wide and not only about buying and selling of coins and tokens at any time and any season. This ignorance has trapped them in most failures sponsored by the volatility and uncertainty of the crypto market. Prices are not steady and can either increase or reduce dramatically within a blink of an eye. It is therefore nearly impossible to predict the best time to trade digital assets if you have little or no knowledge about the Market trends and patterns. In this Case, it is obvious that there is a pressing need for technical Analysis.
What is Technical Analysis?
Technical analysis (TA) entails using different charting tools and historical price data. These tools help crypto investors and traders to make right decisions at the right time to enter and exit trades.
Without a proper trading strategy, you can end up losing your entire savings while trying to make profits off crypto trading. It is therefore wrong to claim that cryptocurrency is just about trading( buying and selling of coins and Tokens and every other digital asset). It's much more complex than that. By understanding the market trends and applying technical analysis techniques, you can make more profit-giving verdicts, and minimize your risk and loss level in the crypto market.
With this here are the 5 top technical Analyses.
Top 3 Technical Analysis Indicators
Here are some of the top technical analysis indicators you should learn if you want to stay atop the trading game.
1. Relative Strength Index (RSI)
RSI is a momentum indicator that measures the magnitude of current price changes to help determine excessively sold conditions in a market. It is calculated using the average profit and loss of an asset over a given period.
To use the RSI when trading cryptocurrencies, a trader can plot the indicator on a chart and observe the resulting line. RSI values range from 0 to 100, with values above 70 generally considered overbought, while values below 30 are considered oversold.
You can use the RSI in cryptocurrency trading to find the variation between the RSI and the price of an asset. If the RSI is making higher highs while the price is making lower highs, it could be a bearish divergence and a potential sell signal. On the other hand, if the RSI is making lower lows while the price is making higher lows, it could be a bullish divergence and a potential buy signal.
2. Moving Average (MA)
Moving average is another technical analysis tool that helps traders spot trends by smoothing price data over some time. We have various types of moving averages, like Simple Moving Averages (SMA), Exponential Moving Averages (EMA), and others. What makes them different is how the current price is weighted and they are calculated.
MA can be used by setting up a crossover strategy. This involves drawing two Moving Averages with different periods on the chart and waiting for the shorter-term MA to cross over to the longer-term MA. When the short-term MA is above the long-term MA, it could be a buy signal. If it breaks below the long-term moving average, it could be a sell signal.
Using MA can help you spot trends and make profits off early crypto calls. But it is important to note that the moving average is a lagging indicator. This means it may not always provide timely signals. It is also not suitable for detecting short-term price movements.
3. Moving Average Convergence Divergence (MACD)
The Moving Average Convergence Divergence (MACD) indicator is a technical analysis tool. It is a momentum indicator that determines the direction and strength of a trend by approximating the split between two moving averages. You can calculate it by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA.
We can use the MACD in cryptocurrency trading analysis by looking for splits between the MACD and an asset’s price. If the MACD is making higher highs while the price is making lower highs, it could be a bearish deviation of and a potential sell signal. On the other hand, if the MACD is making lower lows while the price is making higher lows, it could be a bullish divergence and a potential buy signal.
The MACD can help you make more conscious decisions. But you must be careful. MACD can also provide false reversals. Sometimes a reversal signal from a MACD deviation doesn’t mean that a major reversal is imminent. This could mean a temporary pause before the trend resumes.
In summary:
It is quite important to know, understand and apply the above-mentioned TA as a trader. It goes a long way to help reduce losses. It also helps an investor in profitable decision-making.
Asides from these above-mentioned TA indicators are other potential TA indicators.