🤔 Intuition vs. Strategy: When trading futures, do you open positions based on intuition or rely on technical indicators (TA)?
In 1980, Richard Dennis and William Eckhardt trained novice traders, the “Turtle Traders,” through specific contract trading rules. These traders generated millions in profits, proving that disciplined, rules-based strategies outperform intuition.
Today, let’s dive into the important technical indicators on#BinanceFuturesthat will help you trade with confidence!
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In technical analysis, candlestick charts show price action. Technical indicators use existing data to help traders make informed decisions. Here are some common technical indicators on #BinanceFutures:
1️⃣ Moving Average (MA)
2️⃣ Moving Average Convergence Divergence (MACD)
3️⃣ Relative Strength Index (RSI)
4️⃣ Bollinger Bands (BOLL)
5️⃣ Volume indicators
6️⃣ Support and resistance levels
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Moving Average (MA) Explained
A moving average (MA) is a popular technical analysis tool that helps traders and analysts identify trends more easily by smoothing price data to filter out short-term fluctuations.
1️⃣ Different types of moving averages
🔸 Simple Moving Average (SMA)
🔸 Exponential Moving Average (EMA)
🔸 Weighted Moving Average (WMA)
2️⃣ Double Moving Average Crossover Strategy
This strategy uses two moving averages of different lengths, usually a short-term (such as a 50-day MA) and a long-term (such as a 200-day MA). Often the same type of moving average is used, such as two SMAs, but a combination can also be used, such as an SMA and an EMA.
Learn more 👉 https://academy.binance.com/en/articles/moving-averages-explained
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Moving Average Convergence Divergence (MACD) Explained
Moving Average Convergence Divergence (MACD) is a widely used oscillator indicator that is very common in technical analysis. It uses moving averages to determine the momentum of a stock, cryptocurrency or other tradable asset. MACD consists of three main components: MACD line, signal line and histogram.
Trading Contracts Using MACD
If you are trading the BTCUSDT contract and you see the MACD line cross the signal line upwards, this may be a good time to consider entering a long position. Conversely, if the MACD line crosses the signal line downwards, this may be a good time to consider exiting your position or entering a short position.
Learn more 👉 https://academy.binance.com/en/articles/macd-indicator-explained
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Relative Strength Index (RSI) Explained
1️⃣ RSI is a momentum indicator that shows if an asset is overbought or oversold by measuring recent price changes. The standard setting is 14 periods and the data is displayed as an oscillator on a scale of 0 to 100.
2️⃣ RSI divergence strategy
The RSI divergence strategy can be used when trading BTCUSDT contracts using the RSI with a 14 period setting on the 4-hour chart.
In a bullish divergence, when the price makes lower lows but the RSI makes higher lows, enter a long position when the price reverses, set the stop loss just below the recent low and exit when the RSI approaches 70 or when the target profit is reached.
Learn more 👉 https://academy.binance.com/en/articles/what-is-the-rsi-indicator
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Bollinger Bands (BB) Detailed Explanation
Bollinger Bands (BB) were created by financial analyst and trader John Bollinger in the early 1980s. Bollinger Bands are used as an oscillator measurement tool to indicate high or low volatility in the market, as well as overbought or oversold conditions.
1️⃣ Use Bollinger Bands to open a long position in BTCUSDT contracts
- The price of BTC hit the lower Bollinger Band at $30,000 and started to recover.
- RSI is below 30, confirming oversold conditions.
- Enter long position at $30,100.
Learn more 👉https://academy.binance.com/en/articles/bollinger-bands-explained
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Volume Indicator Explained
Volume indicators, such as On Balance Volume (OBV) and Moving Average Volume, measure trading activity over a specific period. They provide insight into the strength of price movements. High volume indicates strong interest and confirms a trend, while low volume suggests a lack of interest and a potential reversal.
1️⃣ Use the volume indicator to open a long position in the ETHUSDT contract
- ETHUSDT price made higher lows at $1,800, $1,850, and $1,900;
- OBV is also making higher lows, indicating increasing buying pressure.
- Entered long position at $1,910.
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The basic principles of support and resistance explained in detail
Support is a price level at which a downtrend pauses due to increased buying interest, forming a "floor" that prevents prices from falling further. Resistance is a price level at which an uptrend pauses due to increased selling interest, forming a "ceiling" that prevents prices from rising further.
2️⃣ Refer to support and resistance levels for contract trading
- Support Level: BTCUSDT continues to rebound at $25,000.
- Resistance Level: BTCUSDT faces selling pressure around $30,000.
- OBV: A rising OBV indicates strong buying interest.
- VMA: Increasing volumes near the $25,000 support level suggests a strong buying interest.
- Enter a long position near $25,000 support due to rising OBV and volume.
Learn more 👉 https://academy.binance.com/en/articles/the-basics-of-support-and-resistance-explained
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