Topic: Basic Tips and Understanding Common Indicators (Read 146 times)

I want to share what I've gain knowledge in Crypto Trading, by using this common indicators that we can find at some known sites.

Simple Moving Average (SMA)
     - it has the ability to calculate different number of time period by adding the closing price for a number time periods and divide the total number of time periods and will result the average price of the security over the time period. It makes easier to view the price trend. The longer the timeframe for the moving average, the smoother the simple moving average. A shorter-term moving average is more volatile, but its reading is closer to the source data.
     - SMA plays an important rule in trading because it can identify current price trends and potential for a change in an established trend.
     - trading patterns also can be trace using this indicator (death cross & golden cross). A death cross occurs when the 50-day simple moving average crosses below the 200-day moving average. This is considered a bearish signal, that further losses are in store. The golden cross occurs when a short-term moving average breaks above a long-term moving average.

Relative Strength Index (RSI)
     - a momentum indicator that compares the magnitude of recent gains and losses over a specified time period to measure speed and change of price movements of a security. It is primarily used to attempt to identify overbought or oversold conditions in the trading of an asset. In order to avoid false signals from the RSI, use more extreme RSI values as buy or sell signals, such as RSI readings above 80 to indicate overbought conditions and RSI readings below 20 to indicate oversold conditions.

Moving average convergence divergence (MACD)
     - a trend-following momentum indicator that shows the relationship between two moving averages of prices. By subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.
     3 instances may occurs of MACD:
           1. Crossovers  - when the MACD falls below the signal line, it is a bearish signal, which indicates that it may be time to sell, when the MACD rises above the signal line, the
               indicator gives a bullish signal, which suggests that the price of the asset is likely to experience upward momentum. Many traders wait for a confirmed cross above the signal line
               before entering into a position to avoid getting "faked out" or entering into a position too early, as shown by the first arrow.
           2. Divergence - When the security price diverges from the MACD, it signals the end of the current trend. For example, a stock price that is rising and a MACD indicator that is
                falling could mean that the rally is about to end. Conversely, if a stock price is falling and the MACD is rising, it could mean that a bullish reversal could occur in the near-term. Traders
                often use divergence in conjunction with other technical indicators to find opportunities.
           3. Dramatic Rise - When the MACD rises dramatically - that is, the shorter moving average pulls away from the longer-term moving average - it is a signal that the security is
                overbought and will soon return to normal levels. Traders will often combine this analysis with the Relative Strength Index (RSI) or other technical indicators to verify overbought or
                oversold conditions.

This are the 3 indicators that serves as my base guide to do trading.
It would be our pleasure to read and study other indicators to be shared by other members of this forum.
Thank you.