The cryptocurrency market took a negative trend after the “bull” months before mid-May, when we witnessed a huge drop in prices not only at bitcoin, but across the entire market.
However, according to many experts, their popularity is still gaining momentum, and there are more and more institutions in the world that allow payment in digital currencies.
From the beginning of their trading on the stock exchanges, cryptocurrencies have been a popular financial asset for investors who have seen their potential in times when digital currencies were not widely known, and were able to buy and “value” at incredibly low prices.
Traders take advantage of cryptocurrency volatility, help with indicators and market monitoring
In addition to potential, however, cryptocurrencies are also known for their high volatility, ie large price changes in a short time. It in turn plays into traders, whose goal is to earn on price fluctuations by buying lower and selling higher, or by using various financial derivatives or entering a short or long position.
Today, such trading is relatively easily accessible to really everyone, but many people enter it with the vision of a quick and large profit, and then end up in negative values. An experienced trader always counts on the loss of his position and enters the trades in such a way that he has the greatest chance of preventing it.
In the case of cryptomen trading, not only the monitoring of candle formations on the chart, which we will not deal with in this article, can help, but also a number of indicators that can be used to estimate which direction the market will move.
We have therefore decided to briefly present some basic ones that can help in the trade in bitcoin, but also in other cryptocurrencies.
Relative Strength Index (RSI) – shows when the price of cryptocurrency awaits correction and when growth
RSI, or relative force index, was developed by American engineer Welles Wilder, who, by the way he died only in April 2021. However, he left traders an indicator that helps identify when the price of the cryptocurrency is too far from its “real” value.
RSI thus gives the trader the opportunity to identify great entry points where the cryptocurrency is underestimated and, conversely, to “warn” him at a time when the cryptocurrency is overestimated.
RSI is calculated as RSI = 100 – (100 / (1 + RS)), where RS represents the average of the closing price increase for n period (most often 14). The resulting value is therefore in the range of 0 – 100, while the indicator has 2 important levels, above 70 and below 30.
When an RSI exceeds 70, it means that the asset is overbought or overvalued, while an RSI below 30 indicates an oversold or undervalued asset. It is thus relatively easy to predict when the asset will “cool down” and from high values there will be a more or less correction, and vice versa.
Moving Average (MA) – marks support and resistance levels
The Moving Average, or moving average, is a simple price indicator that is used to identify trends in the development of the cryptocurrency price. We know two main types of moving averages – simple and exponential.
A simple moving average shows the basic trend in the price of cryptocurrency, while its slope is determined directly by the average price over a period of time.
The exponential moving average gives more weight to the latest prices and thus records price fluctuations faster than simple, which can be a disadvantage with short “sales” or large purchases of the asset, which will increase the price in the short term.
The moving average can be set to different values of the period, and MA 50, 100 or 200 is used to monitor long-term trends.
Moving Average Convergence / Divergence (MACD) – accurate buy and sell signals
MACD is one of the most popular indicators for bitcoin, especially for its simplicity and ability to predict fluctuations in its price with relatively high accuracy. This indicator normally consists of three exponential moving averages, which are in basic settings set for periods 9, 12 and 26.
The MACD is mainly intended to predict the beginning of a trend based on the moment when, for example, two averages (longer and shorter) intersect, which signals a change in the trend upwards (a shorter average predominates) or downwards (a longer average predominates).
However, this indicator has many other special settings and most experienced traders use it to refine buy and sell signals.
Bollinger Bands – signals the coming “explosion” of the price
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