A number of other indicators help the trader to successfully close trades on the market. In conditions of high volatility, it is best to have as many technical analysis tools as possible at your disposal.
The moving average (MA) is one of the basic indicators that can work independently and is the basis for more complex tools.
MA averages out the price fluctuations of cryptocurrencies, smoothing out sharp deviations.
Most often, MA is calculated for 10, 20, 50, 100 and 200 days. There are also simple (SMA), exponential (EMA) and weighted moving averages (WMA).
The most attention-grabbing indicators for digital asset users are the 50-day and 200-day SMA. When their charts intersect, a so-called âdeath crossâ is formed, which is believed to precede a fall in the assetâs price.
For example, on June 19, 2021, such a figure formed on the Bitcoin chart.
On-balance volume (OBV) indicator indicates strong market movements that are accompanied by changes in trading volume. OBV readings help predict changes in the price of an asset.
As a rule, if trading volumes increase and the price remains relatively stable, the value of the asset will still go up.
The Relative Strength Index (RSI) is an oscillating indicator that measures the speed and strength of an asset's price movements. The indicator helps calculate whether a cryptocurrency is overbought or oversold.
RSI fluctuates between 0 and 100, where values ââ>70 indicate overbought and give a sell signal, while <30 indicate oversold and signal a good time to buy the coin.
Bollinger Bands (BB) indicate the volatility of an asset and record abnormal price fluctuations within the current trend.
This indicator consists of three lines: a 20-day SMA, as well as upper and lower bands that reflect deviations from the simple moving average.
In situations where the price of a cryptocurrency rises above the upper band values, the asset is considered overbought. And vice versa.
Depth of Market (DOM) Chart
Depth of Market (DOM) displays the number of buy and sell orders for a selected asset in an electronic list that is updated in real time. The indicator visualizes current liquidity and market sentiment.
The more orders there are for both buying and selling assets, the deeper the market. However, this is true if the number of orders is approximately equal. An imbalance of orders can lead to high volatility of quotes.
Therefore, the deeper the market, the less likely it is that a large trade will have a significant impact on the value of the cryptocurrency.
Conclusion
The cryptocurrency market is considered the most unpredictable, however, even with basic knowledge of technical analysis, you can try to predict the price fluctuations of assets and thus not miss the opportunity to profit.
To work successfully, a trader needs:
learn to read cryptocurrency charts;
see patterns characteristic of different market cycles;
compare them with other indicators;
react in time and, if everything goes well, take profits.
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