Many new Bitcoin investors think that crypto trading is an effort-thronged method of investing in the market. However, most prosperous traders will tell you that trading is only 10% effort and the rest is about analysis and applying top indicators. Bitcoin trading can be profitable if traders are able of leveraging price variations without getting hauled away. However, it can be risky for new traders particularly if they don’t address it strategically. In this article, we will share some popular and crucial trading indicators to help you address Bitcoin trading properly and profitably.
Moving average (MA)
Moving average (MA) is the computed average that is fixed relative to a period. Bitcoin traders apply this statistical prediction to interpret Bitcoin price trends by grading the consequences of irregularities within data.
BTC/USD Daily Chart: TradingView
In other words, the MA – or ‘simple moving average’ (SMA) – is one of the most useful trading indicators that is applied to recognize the course of a current price trend, without the intervention of shorter-term price trends. The MA indicator consolidates the price points of a financial tool over a defined time frame and breaks it by the number of data points to exhibit a single trend line. For example, in this section, we will use a Bitcoin price chart. Now, at the moment the Bitcoin price is sitting at 17936.99. The above chart is displaying the 200 Day MA. For example,
Given the following list of prices:
$10, $20, $30, $40, $50, $60, $70
The SMA calculation would look like this:
$10+$20+$30+$40+$50+$60+$70 = $280
7-period SMA = $280/7 = 40
Now, the data applied depends on the time of the MA. For example, a 200-day MA needs 200 days of data. By applying the MA indicator, we can analyze levels of support and resistance and examine the history of the Bitcoin price. This indicates we can also discover potential future patterns. The 200 day moving average is an indicator utilized to analyze and recognize long term trends. Actually, it is a line that describes the average closing price for the last 200 days and can be utilized for any cryptocurrency.
Exponential moving average (EMA)
Exponential moving averages (EMA) give more importance to the most recent periods. It follows variations in the price of a coin over a certain period. Unlike the simple moving average (SMA), EMA establishes more importance on recent data features like the newest prices. Therefore, the EMA reacts to a shift in price points quicker than the SMA. When applied with other indicators, EMAs can assist traders to establish meaningful market movements and assess their legitimacy.
ETH/USD Weekly Chart: TradingView
The most important exponential moving averages are 12- and 26-day EMAs for short-term averages. While the 50- and 200-day EMAs are utilized as long-term course indicators. For example, in this section, we will use an Ethereum price chart. Now, at the moment the Ethereum price is sitting at USD 535.002. The above chart is displaying the EMA 12 & 26.
Moving average convergence divergence (MACD)
MACD is also one of the most important indicators. It identifies variations in momentum by analyzing and comparing two moving averages. It can support traders in recognizing potential buy and sell possibilities around support and resistance levels. MACD doesn’t completely qualify to come into either the trend-leading or trend following; actually, it is a combination with factors of both.
XRP/USD Weekly Chart: TradingView
The MACD contains two lines, the fast line, and the slow line. These are simple to recognize as the slow line will be the quieter of the two. Usually, the MACD is computed by deducting the 26-period Exponential Moving Average (EMA) with the 12-period EMA. MACD = 12 PERIOD EMA – 26 PERIOD EMA. For example, in this section, we will use a Ripple price chart. Now, at the moment the XRP price is sitting at 0.5163. The above chart is displaying the calculated MACD.
Now, the chart will always tell us about convergence or divergence. ‘Convergence’ indicates that two moving averages are developing concurrently, while ‘divergence’ indicates that they’re moving away from each other. If moving averages are converging, it means the price drive is declining, whereas if the moving averages are diverging, the drive is growing.
Traders might prefer to apply a simple moving average strategy to place their buy and sell flags, but this measure can be limited, which suggests the market conditions could switch before the trade is completed. This is why the moving average convergence/divergence indicator is successful, as it gives an up-to-date description of what is occurring in the cryptocurrency market.