Apr 14, · On Balance Volume (OBV): This is one of the best indicators for day trading bitcoin. It is used to basically analyze the total money flow in and out of an instrument. The OVB uses a combination of volume and price activity. This tells you the total amount of money going in and out of the market/5(48). The best bitcoin indicators are RSI, moving averages, Ichimoku clouds, Fibonacci (it's a tool though), volume, momentum, basically, whatever helps you park the car better, but you can do it all without if you know how to drive. And Blockchain Whispers followers are not pussies - .
Best indicators for bitcoin tradingBest 8 Bitcoin Indicators for Cryptocurrency Trading - Mycryptopedia
In this guide, you will discover five of the most popular bitcoin indicators that you can use to potentially predict future price developments. Indicators are tools used with technical analysis to help traders try to predict price movements. Technical analysis uses historical price data — anywhere from years to seconds-old — to provide mathematical models of price action. These models are either turned into indicators. The data from the formulas is output into a graph, and the graph is overlaid on a chart or positioned alongside it to help traders make decisions.
However, they can help a trader observe trends and assess their strength. The logic justifying indicators follows Newtonian physics: Price moves have momentum, and the more momentum a move has, the harder it is to stop, and vice versa.
On the other hand, if a couple weeks have gone by, and the numbers drop from 30, to 15,, to 5,, you may want to think twice before ordering more of the toy. The Ichimoku Cloud indicator is a conglomeration of five lines, and each line displays averages over time periods, the overall length of which can be determined by the trader. When the price is above the cloud, the trend is up, and when the price is below the cloud, the trend is down.
If the cloud itself is also moving in the direction of the price, the trend is a strong one. RSI is one of the simplest indicators. It indicates if an asset is overbought or oversold. RSI uses historical data to try to determine the overall demand for an asset. It then calculates whether people are buying so much of the asset that there is likely going to be a downward correction in price or if the opposite is occurring, and the price is likely to rise.
The RSI indicator has two lines, one at 30 and another at According to the indicator, when the reading is above 70, the price is likely to drop, and when the reading is below 30, the price is likely to rise. When prices spike in one direction or another, it can be easy to misinterpret these movements are reversals or continuations of a trend. A moving average indicator calculates the average price over a time frame, recalculating it as time passes.
A short-lived spike will have little effect on a moving average indicator set to a long-enough time frame. Looking at a graph depicting moving averages can be useful in determining support and resistance levels. Resistance is the opposite: a level above the price through which it is unlikely to make a sustained move.
Fibonacci, like moving averages, is another useful tool when trying to predict the parameters of price action.
As a trader, overbought conditions offer a chance to take profits on a position or even close it entirely. A trader could also open a short position and profit from the downward price action.
Created in the s by John Bollinger, a financial analyst, Bollinger Bands are utilized by traders for technical analysis. They work as an oscillator measurer, indicating whether the market has a high or low volatility or even if there are overbought and oversold conditions. The main idea behind this Bitcoin indicator is to show how prices are spread across an average value.
Bollinger Bands are composed of an upper band, a moving average line, and a lower band. The two outer bands react to market price action. They expand move away from the middle band when volatility is high and contract move closer to the middle band when volatility is low. As for the top and bottom bands, these are calculated based on market volatility. If the price touches the upper band several times, it could be a sign of a significant resistance level.
Therefore, Bollinger Bands are suitable for short-term trading as you can analyze the market volatility and try to predict the movements that are likely to come. Of the Bitcoin indicators, the Moving Average indicator is used to smooth price action over a given period. There are two types of Moving Averages; simple moving average and exponential moving average. As a trader, the MA you opt for depends on your trading style.
So, if you are a short-term trader, a shorter MA is more effective for your trading style, while a longer MA is suitable for a long-term trader. In trading, MA acts as a support or resistance. MA slopes can help a trader define a trend, and doing this is quite simple. Once you find out that the MA is sloping upwards, it means the asset is in an uptrend or gaining in price.
But, if the MA is sloping downwards, then this means the asset you are assessing is in a downtrend or losing in price. The chart below shows the slope changing towards the end, which suggests the price entering a downtrend.
Therefore, a moving average slope can only help you define a trend. Moving average crossovers offer another popular trading signal. You can use only two crossovers to avoid cluttering your chart and ensure one of the moving averages MA is longer than the other.
Once you have a short-term MA and a long-term MA switched on your chart, watch out for the crossovers. This is what they mean: If the short MA crosses above the long MA, then this is a bullish trading signal. But, when the short MA falls below the long MA, then this is a bearish trading signal. See the bearish cross in the chart below and the tremendous price drop that follows. EMAs are used over regular MAs to improve sensitivity to trend changes and price momentum.
The signal line, by default, is a 9-period EMA when the signal line is combined with the MACD line, where the two lines converge, diverge and cross forms the basis for many trading signals. The zero line is the level where the MACD line is at zero. The histogram shows the distance of the MACD line from the signal line.
When two oscillating lines crossover, the two common trading signals you can generate using the MACD include: bullish — where the MACD crosses over the signal line or bearish — where the signal line crosses over the MACD line.
And since these crossovers happen quite often, you could experience a lot of false positives. Therefore, you are better off combining these signals with others to generate better trading decisions.
If the MACD line and signal line rise together, then this is considered a bullish sign and represents increasing positive momentum. You can use MACD to find areas of price divergence, thereby offering a trading signal. A bullish divergence is found when the price prints a higher low while MACD prints a lower low, or the price prints a lower low while the MACD prints a higher low. Consequently, a bearish divergence is found when a price prints a higher high, and the MACD records a lower high or when the price prints a lower high while MACD records a higher high.
The chart below shows a situation where the price prints a lower low while MACD prints a higher low, indicating a trend reversal is imminent.