Trade figures. How to apply in cryptocurrency rate analysis?
A lot of traders appreciate technical analysis (TA - monitoring of cryptocurrency rate online
), and consider that its instruments help to understand the market situation, and forecast future changes. Certainly, technical analysis does not suggest a singly of a few techniques – the number of its instruments is much greater.
TA usually includes trade line creation, analysis of the figures indicating cryptocurrency rate dynamics, and a range of other analytical instruments. We have already discussed lines of resistance and support
for cryptocurrency price, and their practical application for cryptocurrency rate forecast. Additionally, we have considered the reasons and factors
affecting cryptocurrency rate dynamics. Today we will regard one of the most important analytical instruments - trade indicators
Trade figures. Basic information and classification
So, what are trade figures? How is it possible to forecast cryptocurrency rate using one of the trade indicators?
Technical indicator (or market indicator)
– is a function using specific mathematical expressions (depending on a type of chosen indicator) to determine market tendencies based on the data obtained from graphs.
In diagram form, calculation results are “lines” performed by social program (for example, trading terminal); sometimes, these lines can be adjusted while working with cryptocurrency rate online under condition that such option is available. It is possible to make calculations by formula, or make function graphs by hand. However, hand-drafted method is applied rarely if ever.
In most cases the role of the original variable in formula is presented by price changes typical for the recent market history of cryptocurrency rate.
Indicators are divided into:
. These indicators are aimed for work under clear market trend presence. For instance, if we have a look at bitcoin rate dynamics graph, we will see now such a trend at the market;
. These indicators are mostly effective during flat periods (price “calm”). However, under condition of active market movements, these indicators are to be applied with extreme caution. As for today, bitcoin price is increasing rapidly, which means that oscillators will analyze bitcoin rate to a tolerance.
Some types of trade indicators
Moving average (“sliding average”)
is thought to be one of the simplest and most popular indicators. This indicator is based on the averages prices for a specific period. The “average sliding” – a formula shaped on artificially calculated averaged prices is put above graph indicating the real price movements. A lot of similar “lines” are usually applied.
The average sliding line (or moving) can be determined through differently. The average exponential is used most frequently due to it may faster get stabilized after sharp price bounces typical for cryptocurrency rates. Additionally, average, median line-based, simple, and weighted average indicators are applied.
A moving average value changes along with cryptocurrency rate movements. If you compare the actual price and moving average value, you will make an understanding of the general price tendencies.
If the actual price is higher than the average moving during a specific period of time, then it indicates a positive price trend. In other words, we can expect for the further price increase. However, the converse case can also be true. The price, which is lower than the moving average, indicates the further possible price decrease. We shall have a look at the actual bitcoin rate as an example. We will see that bitcoin rate has been exceeding the moving average lately. A positive trend was realized, which is also confirmed by current high bitcoin value.
The newcomers will find cryptocurrency rate online analysis using a single average moving quite simple. However, the efficiency of this method is still doubtful. The more experienced traders apply more average moving indicators (2/3). These moving indicators differ by the time needed for average price calculations. Let’s have a clear example of it. Supposing you are using a graph indicating bitcoin rate
with an interval (price “move”) of 5-7 minutes to a period of 24 hours. If the graph indicates the selected types of moving indicators, among which the first is based on the average price for an hour, and the second applies the 2-hour period. These moving indicators can be further designated as EMA12 and EMA48 (in other words, average prices for 12-minutes, or 48-minutes time periods).
The application of several moving indicators enables to forecast more accurately, and provides some additional advantages. Two moving indicators crossing (one-hour and four-hours, for example) indicates most likely the trend shift. It means that the point of moving indicators crossing is the point of trend reversal. In case of uncertainties the ‘senior’ moving indicators’ data, which is based on a greater period of time (for instance, daily moving is older than hourly), is considered to be more authoritative. Nevertheless, it is still better to draw on the signals combining the crossing of two and more moving indicators. It can boost the efficiency of a forecast.
Read the continuation of the article about trade indicators and their application in cryptocurrency rate analysis in the coming EXMO material.
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