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The price behavior and trading volume is always the focus of technical analysis. In addition, use is made of data points that are derived from the price and are intended to provide a deeper insight into what is happening in the market. They are called indicators and offer a variety of applications for price analysis and forecasting.
Indicators help you provide insight and information about market opportunities and trades. In this way, you can set up a mature trading plan, practice sound risk management and thus take full advantage of what is happening in the market.
Advanced technical indicators in particular rely on complex mathematical formulas that you don’t need to be familiar with. Indicators are now easily presented to you visually in your price graph.
Some of the most popular indicators for beginners include the Relative Strength Index (RSI), the Moving Average Convergence/Divergence (MACD) and the Fibonacci indicator, which we will take a closer look at in this article.
The Relative Strength Index (RSI)
The RSI is an indicator from the group of oscillators. It shows you whether the respective asset is overbought or oversold. It can help you determine if that asset is at the bottom of its trend or has room to move, and help you find the best time to buy or sell.
The result of the RSI is illustrated on a scale from 0 to 100. High readings mean the value is overbought and a possible end to the uptrend is imminent. Low values mean the exact opposite. The mean values are usually less relevant for entries and exits.
The Moving Average Convergence/Divergence (MACD)
The MACD indicator is used to show the momentum of an asset. MACD means moving average convergence/divergence indicator. It was founded by Gerald Appel in the 1970s.
As the name suggests, this indicator is based on exponential moving average prices. The MACD consists of three elements, which we will illustrate using example values.
the MACD line: 26-day exponential moving average and 12-day average subtracted. The distance between two moving averages is determined.
This result is compared with the moving average of the last nine days. This is how it forms signal linewhich illustrates changes in the momentum of the price.
Ultimately, the MACD consists of one histogram, which represents the distance between the signal and MACD lines. Together, the components give you insight into the direction and strength of a trend.
The Fibonacci indicator
Leonardo da Vinci used them for the Mona Lisa, and they can also be found in the dimensions of the Apple logo or the Egyptian pyramids: the Fibonacci numbers. They are an infinite sequence of natural numbers, where each Fibonacci number is the sum of the two preceding numbers.
In this way they form a balanced relationship for the eye and can be found everywhere in nature. They are also relevant for crypto traders.
When correcting and predicting the price, points can be identified that correspond to the golden ratio and act like magnets on the price. The basic premise is that prices stall at certain support or resistance levels more often and are therefore useful for predicting price and entering or exiting trades.
This is how you continue to educate yourself
In the market, there is nothing to avoid building your own well-founded trading strategy. Only with real knowledge can you really benefit in the market in the long run. You have to be aware that each of your trades can be wrong and therefore losses are an integral part of your trading career.
This is why education plays such a big role in the cryptocurrency and trading world. So, to create your own strategy, you should be aware of the basics of blockchain and trading.
However, technical analysis and indicators are not all you have to deal with. Likewise, you should consider factors such as market psychology, fundamental analysis, and risk management.
For this reason, there are portals like the Binance Academy, which were created for the education and training of crypto beginners. Beginners will find all the necessary information there so that they can prepare for the various risks in the market and are also informed about all the basics of blockchain technology.
For example, in the Binance Academy you will find all the answers to the most important questions about trading and indicators, Bitcoin, blockchains, NFTs, metaverse, gaming and much more.