Trade figures – what indicators to choose? Part 2

What are trade indicators like RSI, Stochastic and ZigZag?.. Why are they useful for a trader when predicting the course of a cryptocurrency?.. Data based on moving average indicating long period of time is more reliable… RSI value determines whether market is experiencing resale, or overbought…EXMO experts analyzed figures like RSI, Stochastic, ZigZag...

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Trade figures – what indicators to choose? Part 2


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We have previously discussed the basics of the trade indicators, its characteristics and qualities under the analysis of the cryptocurrency rate dynamics in article "Trade figures – what indicators to choose? Part 1". Apart from average moving, there are additional technical indicators. Some of these indicators are more complex for understanding comparing to the moving average. However, they may be more efficient for trade analysis. These are the following.

RSI


RSI indicator (“relative strength index”) is included to the oscillators. Similar to the other oscillators, it is more reliable under flat. Visually it looks like a line chart passing through the points from 0 to 100; the program device calculates the value of RSI for every specific moment on the back of passed price changes. RSI trader can judge on the market pricing perspectives, including market resale (under condition RSI is lower than 30), and overbought (under condition RSI is higher then 70). Resale is likely to initiate the bull trend (price growth perspective). At the same time the overbought will sooner or later lead to price decrease.

Let's have a look at the RSI indicator describing the changes in BTC/USD prices during an hour (Graph 1) and during 4 hours (Graph 2).

Graph 1

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Graph 2

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Stochastic


Visually Stochastic is also similar to RSI because it is also referred to oscillators indicating a value from 0 to 100. In case of Stochastic, the moving line does not overlap the major price graph with cryptocurrency rate, but neighbors symmetrically in time. It is quite simple to calculate Stochastic. The closing price for a particular day is compared to a total range of minimum and maximum prices for this day (24 hours’ period by the exchange time). Supposing bitcoin rate against dollar (indicated on the BTC/USD graph) was at the start of the day made 12500 USD with a minimum value of 12400 USD, and maximum value of 12600 USD, making 12520 USD at the end of the day. In this case Stochastic value will make:

(12520-12400) / (12600-12400) = 0.60 (60%)


Thus, in course of calculating Stochastic, we are not interested in rate at the beginning of the period (24 hours’ period). We are interested in the lowest and highest rate peaks and its value at the time of period end closing. In this case, Stochastic is figured from the data of how much bitcoin costs for today, at the end of the period (24 hours’ period). Stochastic chart line is made of the calculated values for the selected period of time, for example, for the last 14 days (14-days Stochastic).

It is easy to guess that if “bull” trend was on within 24 hours, Stochastic will be quite high, and if “bear” trend was on, Stochastic will be less than 30. If Stochastic is applied during flat, it helps to notice the upcoming trend before it comes into force.

Similar to RSI, if time period is more or less durable, Stochastic can work more effective in the number of cases. Besides, oscillator-indicator can work better during price flat, then its rapid increase, or decrease. The matter is that major price shifts affect Stochastic indications making them less accurate. During long periods of time such errors are neutralized to a certain degree.

ZigZag


ZigZag is an indicator demonstrating market entry points following automatic analysis of rate extremes – the lowest and highest price peaks on a graph illustrating cryptocurrency rates. The mentioned indicator has a following advantage. In course of market analysis, the factors affecting the accurate price trend more are put aside. At the same time ZIgZag is more complex for understanding than the other indicators due to the indicating signals come with delays. As a result, traders risk to select a wrong market enter point.

The input parameters of any indicator, including interim period, moving average calculation technique are not all suitable for forecasting the movements of a specific asset on a particular market. Usually, it is better and even required to test different techniques and indicators to select the most appropriate one for a specific market situation. The number of parameters need in a particular case is determined practically. Thus, if forecasting is not accurate under the application of the selected indicator, then the ideal parameters are to be searched.

By the way EXMO team has announced the renovation of the 'Buy & Sell' page in the article "The 2017 results: EXMO core achievements". The introduction of the new analytical instruments, namely Trading View online graph, is going to be the main innovation of the mentioned renovation.

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Visit EXMO Youtube channel to find out useful information on cryptocurrencies and trading on the platform.

Additional materials that may help you:
Trade figures – what indicators to choose? Part 1
Bitcoin futures: what’s the matter?
Cryptocurrency rate changes: reasons and factors
Reach more profit on EXMO – gain 25% more
Instant deposits in EUR on EXMO

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