2022-08-08

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Technical analysis is a reliable assistant in cryptocurrency trading, which you cannot do without. There are thousands of indicators on the basis of which crypto traders develop their own strategies.

Most of them can be difficult for beginners to understand. But there are also effective strategies that have gained great popularity among novice traders due to their simplicity. In this article, we will talk about such strategies that will be easy for a beginner to understand, but at the same time they will help in trading.

 

How to use indicators

Technical indicators reflect real market performance and help identify key support/resistance, overbought/oversold levels, trend direction and more.

With the help of indicators, crypto traders can find the optimal market entry points and receive signals to buy and sell cryptocurrencies with a certain accuracy.

Based on indicators, traders create their own strategies. As a rule, indicators are used combined for more accurate signals so that the trader can see a more complex picture of what is happening in the market. This eliminates unnecessary noise and allows you to extract the necessary information faster and better.

As a rule, crypto exchange terminals contain pre-configured basic indicators that a trader can use in their trading, such as SMA (moving averages), MACD, Volume and others.For example, Binance charts are pre-installed with 3 moving averages with different periods and the Volume indicator. MA indicators smooth out price fluctuations and calculate average price values, allowing you to understand which direction the trend is currently in. And the Volume indicator reflects the current market activity: how much buyers (bulls) or sellers (bears) prevail.

Traders can add, remove and customize the indicators they need according to their individual trading preferences. But for beginners, standard settings will be enough – they are recommended by the creators of these indicators and are often used by professional traders. As you gain experience, you will learn how to customize the settings for yourself. Next, we will look at popular trading strategies and explain how to use them in crypto trading.

Scalping is not the easiest strategy for novice crypto traders, but with proper risk management, it can bring good results. The essence of scalping is to make many transactions during the day to get a small profit up to a few percent. However, cryptocurrencies are highly volatile assets, and their price can change by 10% – 50% or more within one day. But this carries increased risks for traders, especially beginners.

 

How to trade

This means that it is important for a trader to determine at least two key parameters: support/resistance levels and trend direction. With the help of support and resistance levels, a trader can determine when it is best to open / close positions. When the price rebounds from the lower border, this is a buy signal, and a rebound from the upper border is a sell signal.

Particular attention should be paid to moving averages. Crossing the MA can indicate both a local and a global trend change. The Volume indicator will additionally help form a picture of the market and indicate bearish and bullish divergence. For example, if the indicator displays red, but it is green on the chart, then this indicates that the power of the bears is drying up and the price is preparing for a breakout.

What indicators to use
Since you need to determine the direction of the trend and key support and resistance levels, trend indicators, as well as volume and momentum indicators, are suitable for trading:

  • SMA
  • MACD
  • parabolic SAR;
  • RSI;
  • volume.

The trend can change at any moment and it is impossible to predict it. Therefore, it is important to ensure that trend indicators maintain their direction.

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