Technical Indicators are one of the important tools that one needs to use while reading crypto charts. These indicators help users to make informed decisions. By utilizing advanced mathematical concepts based on volume and price, traders and investors can get an insight into future potential price movements. Here are some important tips that would help you to use technical indicators to a complete extent.
Top 6 tips on how to use technical indicators while reading crypto charts
Always choose the correct set of indicators:
There are a lot of technical indicators available, but not all of them could be equally useful for the use case and to analyze the crypto chart. Hence you should look for the indicators that are typically designed for the crypto trading market, for example, Ichimoku Cloud, or the ones that is well suited to identify the trends like MACD and moving averages.
Amalgamate different Indicators:
There is no single technical indicator that can offer the full picture of the price movements of any cryptocurrency. As a trader, you need to use different technical indicators together to gain much wholesome and comprehensive understanding of the crypto market. For an instance, you need to use RSI to gain insight into overbought and oversold and also use Moving averages at the same time to understand the overall trend of the asset.
Always be mindful of any wrong signals:
Technical Indicators can sometimes give false signals. For example, a sudden increase in the trading volume might indicate the overbought situation of the cryptocurrency while using RSI, but in reality, the price is about to rise even more. So it is advisable to always consider the context in which the indicator is displaying the information and also use your own intelligence to know if the signal is correct or not.
Always keep in note all the key levels:
All the technical indicators can be quite helpful for knowing the key levels for resistance and support. For an instance, if the cryptocurrency has been bounced off in the past repeatedly, then the moving average or some other indicator would help you to determine if you should hold it for the future and identity its certain level.
Experiment with a variety of settings:
A lot of technical indicators would allow you to adjust settings based on specific cryptocurrencies and the time format for which you want to analyze. For example, you should use the smaller moving average for the cryptocurrency that experiences sudden price fluctuations.
Always use Indicators with different Strategies:
The technical indicators can be the key part of the trading strategy but they should be used with different approaches and strategies too. You should combine the fundamental and technical analysis together to evaluate cryptocurrency performance.
Summary
By leveraging the technical indicators along with other tools for reading the crypto charts like trend lines or candlestick patterns, you can get more information about the market based on which you can make more informed decisions.