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There are myriads trading indicators in the crypto world… But how to use them in practice? How to combine them and apply them to strategies? Discover in this article.
How to combine trading indicators?
Traders may now use a variety of stock indicators to properly examine the cryptocurrency market and receive the appropriate signals. Cryptocurrency trading also entails the use of indicators to determine when to enter and quite a deal for optimum profit. To trade cryptocurrencies more efficiently on the exchange, it is sufficient to understand and combine no more than 2-3 technical analysis tools. This will produce a better outcome than manipulating a large number of various indicators without knowing their purpose. In this article, you will discover how to combine two or more indicators trading on different strategies.
Why trading indicators are important
As a rule, professional traders analyze the present condition of the market and the prospects of price fluctuations (trend) of a certain trading instrument. Fundamental and technical issues are inextricably linked, yet the techniques of effect on prices differ. As a result, a cryptocurrency examination comprises at least two distinct dimensions: fundamental and technical. Thus, trading indicators have already demonstrated their worth in the currency and stock markets.
First of all, technical indicators advise traders on when it is best to begin or cancel a position. People apply many sorts of technical indicators for various trading approaches. Some techniques are useful for long-term investments, while others are suitable for scalping or day trading. Based on the strategy chosen, the trader uses indicators that most effectively assist in evaluating existing trends and forecasting price movement.
What is Scalping?
Scalping is a trading strategy that focuses on the advantage of small price swings in cryptocurrency trading. The trader launches a large number of short deals to profit a few points. There is no time for complete and exhaustive market research or long timelines – it is important to act immediately. That is why scalpers employ indicators to hasten up decision-making. They allow you to appraise the issue quickly and respond without excessive contemplation. Besides, scalping is not the easiest method for inexperienced crypto traders, but it may provide good rewards with reasonable risk management.
Indicators in Scalping
Scalpers frequently use indicator combinations that supplement one another. Traders must identify at least two key parameters: support/resistance levels and trend. Using support and resistance levels, you can determine when it is the perfect moment to begin and exit trades. When the price touches the lower limit, it is a buy indicator, and when the price bounces off the higher barrier, it is a sell signal.
The combination of indicators with a trailing signal, such as Moving Average or Bollinger Bands, with leading indicators, such as Stochastic or RSI, is quite popular. You can find all the detailed information about mentioned trading indicators on Bit4you Academy.
Furthermore, Moving Averages crossings can suggest shifts in both local and global trends. The Volume indicator will also aid in the formation of the market picture by indicating a bearish and bullish trend. For example, if the indicator shows a red one but the chart shows a green one, it suggests that the bears’ dominance is waning and the price is ready for a breakthrough.
Of course, you can use technical indicators in scalping, but their signals should be seen as a range of possible transactions. Profitable scalping is only feasible with the use of trading techniques that combine other technical tools.
What is Swing Trading?
Swing trading, along with day trading and position trading, is one of the most popular trading strategies. For novices, this type of trading is preferred since it moves at a much slower pace than day trading, allowing the trader to spend more time monitoring each position and determining the optimum entry point. Swing trading positions are kept for an extended period and might be open for days or even weeks.
A swing trading indicator is a technical analysis tool that is based on historical data and performs mathematical calculations to determine various elements of price movement. A swing trading indicator is any technical analysis indicator that appears on the chart to assess market dynamics. Technical analysis indicators assist traders in determining if a trend is bullish or bearish and how it will behave in the future.
Indicators in Swing trading
Tendency, momentum, and volume are the three most essential forms of indicators for swing trading. (Read about them here in our Academy section). However, technical analysis elements may differ, but all of them, such as the Moving Average indicator or MACD, should help to detect the trend. Using the Moving Average (MA), you can detect an uptrend’s support level and a downtrend’s resistance level. In addition, use Fibonacci Levels to set price goals and spot retracements.
The crossing of the fast and slow MA lines below the MACD zero level will be a buy signal. Simultaneously, the fast-moving average must cross the slow MA from bottom to top indicates a price reversal to growth. A downward crossover of the slow MA indicates a sell signal. However, this crossover does not have to be above the MACD zero level.
What is Trend Trading?
The direction in which the price of crypto-assets swings is referred to as the trend. The downward trend is commonly referred to as the bear market since it is denoted by a red column on charts and descends to the bottom. The rising tendency, known as a bull market, indicates that the price of cryptocurrencies rises.
Indicators in Trend Trading
Moving averages, MACD, and Stochastic RSI are three of the most used trend indicators. During an upswing, the price climbs in a narrow channel in a staircase and may slightly exceed its boundaries. And, on average, each local minimum is higher than the one before it. In a downtrend, a breakdown of the resistance level is the time to start trading. A breakthrough, on the other hand, can occasionally be deceptive. If the price instantly reverses after the breakthrough and returns to its previous position, this might indicate a false breakout. At this moment, it is better to wait for the trend to become evident.
How to combine indicators on bit4you?
Important to note that you can easily apply indicators on bit4you trading terminals. For this, you need to log in to your account and click on Markets. After choosing the particular asset, switch from Simple chart to TradingView. By the way, you also can move to advanced mode. Then, choose a technical indicator from the drop-down list “Indicators”. It will display on the chart. We recommend using no more than two or three at once.
However, some traders believe that technical indicators are not as effective as they should be. So, let us remind you that technical indicators are not meant to accurately predict potential price movement, but they may assist you in making the best decision based on an in-depth market study.
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