When it comes to trading cryptocurrencies, there are several strategies that crypto traders might follow in order to make the best trade. They mostly rely on specific patterns that can be found in studying price movements of the coins that the trader is interested in. Since some technical indicators have grown to be very popular among the traders, as well as in numerous other industries, we have decided to list them up and explain them.
4 Technical Indicators Bitcoin Investors Need To know
1) RSI (Relative Strength Index)
RSI is one of the best-known terms in the crypto industry, but it predates it quite a bit. It was invented back in 1978 by J. Welles Wilder, and it concerns the Relative Strength Index. The RSI is used for determining how strong the current price is, and whether or not a big change is about to arrive. The traders are customizing its parameters in a lot of different ways, like changing the period.
RSI can also be used for determining the state of the market. The market can often be oversold (under 30) or overbought (over 70). Even though the results can't accurately predict and guarantee a certain development, traders still like to use RSI to have at least something to go on when trying to plan their next move.
2) Fibonacci Retracements
Looking at the Fibonacci Retracements is a method of trying to determine the financial world's proverbial levels of resistance and support. While nobody knows who came up with the idea of using Fibonacci ratios for analyzing prices, it is known that the method was created around the 1930s.
As the name suggests, the method comes from the Fibonacci number sequence. As such, it allows traders to determine the most probable targets for placing buy and sell orders on. There are three key levels that are considered to be the main resistance levels, and those include 38.2%, 50%, and 61.8%.
Next, we have MACD, which is short for Moving Average Convergence and Divergence Indicator. This is a concept that was invented by Gerald Appel, back in the 1970s. Since then, it became a pretty reliable pattern for determining histograms for various markets. It allows deeper insight into the market's short-term evolution. Additionally, it can be used for determining whether the market is oversold or overbought.
4) Bollinger Bands
Finally, we have Bollinger Bands pattern, which is one of the favorite tools of the crypto traders. It was invented back in 1983 by John Bollinger, which makes it the youngest on this list. It allows traders to determine price volatility rate and range. Anyone who has kept an eye on crypto prices during a week or longer will know instantly why this is among the most valued treasures in a crypto trader’s arsenal.
Crypto market's volatility is huge, and any method of predicting its behavior is something that each trader desperately needs. Bollinger Bands can also show the fluctuations of the all financial markets. It also has numerous other purposes, and if the trader is an expert, they will be able to determine whether the signals are simple or strong. Novice traders are its main users, although it is not unusual to see an expert relying on Bollinger Bands either.