Best relative strength indicator for cryptocurrency

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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. This is due to its simplicity and also the ability to provide strong crypto trading signals.

The MACD represents a trend following indicator that highlights whether the short-term price momentum is moving in the same direction as the long-term price momentum, and in cases where it's not, then it's used to determine if a trend change is near. 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. Unlike other Bitcoin indicators, the MACD has no absolute range; thus, it's not suitable for assessing oversold and overbought conditions.

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.

But, if MACD is falling, that's a bearish sign and highlights increasing negative 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. Fibonacci Retracement This indicator predicts the potential support and resistance levels for an asset's price action.

The word Fibonacci comes from the Fibonacci sequence brought about by Leonardo Pisa, an 11th-century mathematician. The Fibonacci sequence is derived from a sum of the preceding two numbers, with each number roughly 1. This phenomenon extends even to trading when traders analyze price action. This allows one to derive levels in a trend in which the price is likely to respect. This is achieved by dividing the peak to trough distance or trough to peak distance by the phi and other ratios in the sequence.

Some other crucial ratios include 0. As you gain experience trading, you will realize that price reacts to these levels regularly; thus, it can offer you optimal entry and exit points. When you identify these points, you can select the Fibonacci retracement tool in your trading software and connect a swing low to swing high. This way, you will be able to generate potential support levels, also known as retracements. To find resistance levels, follow the same process but, in this case, connect the swing high to swing low.

Stochastic Oscillator Bitcoin indicators such as the Stochastic Oscillator show momentum by comparing the closing price of Bitcoin with its high-low range over a given period. The good thing is, this indicator works excellently no matter the volatility. However, there is no need to panic about the calculation since chart software and trading platforms will process the formula and provide you with a stochastic oscillator, as you will see in the chart below.

All that is needed is knowledge of how to use the oscillator to make the most for your efforts. The indicator reads on a range of 0 to with the area above 80, showing overbought conditions and the one below 20 representing oversold conditions. Ichimoku Cloud The Ichimoku Cloud indicator consists of five lines, with each line displaying averages over specific periods, with a trader being able to determine how long they need to be.

They represent some of the most visual Bitcoin indicators, and this makes them easy to interpret. Also, they clearly define support and resistance, identify trend direction, gauge momentum, and provide several trading signals.

If you find the cloud itself moving in the direction the price is moving; then the trend is quite strong. Conclusion There you have it — our ranking of the 8 best bitcoin indicators for trading crypto. For example, in strong market trends, the price can keep moving higher despite the RSI indicating that the market is overbought.

The RSI can be a great tool for helping you make certain trades. Entry and exit for your trade RSI can help inform traders when to buy low and sell high. For example, a trader may wait for the RSI to go above 70 to exit a position. Similarly, they could wait until the RSI is below 30 before entering a trade.

Some traders see this as a way to get more crypto for their dollars. Swing trading Swing trading is when you trade between short-term price rises and declines. The RSI is one indicator used to signal when to buy and sell.

For example, a trader may buy when the RSI crosses below 30 and then sell when it crosses above 70, then buy again when it crosses below Of course, the trader can use short positions for the declines as well. Support is the price the market is struggling to dip below and resistance is the price the market is struggling to break above.

And when used in combination with the price chart, the support and resistance zones can be much easier to identify. Bullish and bearish divergence Bullish RSI divergence occurs when both the price is making higher lows and the RSI is making declining lows. If the RSI is also in the oversold territory, this is especially bullish. Bearing RSI divergence is the opposite. It occurs when the price is making higher highs and the RSI indicator is making lower highs.

This can be a sell signal for some traders. The RSI is often mentioned in this report and is a key trading signal. Disclaimer: Information provided is for educational purposes and does not constitute financial product advice. You should obtain independent advice from an Australian financial services licensee before making any financial decisions.