Regardless if we’re talking about the equity market, commodities, or cryptocurrencies, technical analysis is the foundation of trading and investing because we use this analysis to try to find price direction through data study that the market provides for the specific asset, wherever it’s data from the past, prices, or volumes.
We often use mathematical calculus indicators represented as lines on a price chart in technical analysis. These help traders identify specific signals and market trends, depending on the information they are searching for. For example, some indicator values can show if the asset’s price will continue in a given direction or not, whereas traders can take buy or sell signals.
RSI
Relative Strength Index (short, RSI) is one of the leading trading indicators and probably the most well-known and has at least three primary use cases. First, RSI’s value moves between 0 and 100, representing price fluctuations and the difference between recent price increases and decreases. Thus, RSI levels help measure the market’s impulse and trend strength. Among others, RSI shows us if an asset has been overbought or oversold by comparison with its base value. For example, the asset is oversold when the RSI is under the 30 value, and price growth could follow after the correction is done.
Moving Average
Moving Average is a slow indicator that considers price movements from past days. The Moving Average is used to predict price movements and find trends. Mainly, there are two existing types of Moving Average: simple and exponential. A trader has to choose the Moving Average they are going to use depending on his trading style:
- Is the trader going into a particular asset for a shorter or a more extended period?
- The trader must keep in mind the exact period they will have exposure.
If the Moving Average is inclined to the upside, that may say that the asset’s price is still growing. The same if the Moving Average is inclined down: it says that the price may go lower.
MACD
The Moving Average Convergence Divergence indicator is helping in recognizing the market’s current trend. It also offers a series of trading signals. The indicator consists of two lines: the MACD and the signal line, which is lagging. We can determine the upcoming calls by looking at which direction against zero the indicator is. When MACD is above zero, the price is in an ascending phase. If the MACD is below zero, the price goes through a bearish period.
Total Value Locked
In the crypto sphere, it’s crucial to check the Total Value Locked indicator created to measure the interest of the crypto market in a specific asset. Total Value Locked, which designates (as the name suggests) the total value of crypto assets deposited in a decentralized financial protocol. TVL includes deposited coins in every function provided by DeFi, like staking, loans, and liquidity pools. The more a big chunk of cryptocurrency is staked over a medium period, the more users that hold that cryptocurrency will not sell it soon. Instead, traders keep the coins on spot, maintaining an ascending trend. Because the coins are locked for 30, 60, or longer periods, these coins cannot be sold regardless of what will happen. Therefore, an eventual price correction will not be pushed by enormous selling volume, and the coin’s price will not be dragged lower because of the market’s fear.
Circulating Supply
Circulating Supply refers to the number of cryptocurrencies available on exchange platforms at a given moment. Once we buy a cryptocurrency, we can stake it or use it in multiple DeFi functions mentioned above or keep it in unhosted electronic wallets. This total amount of circulating coins does not include the assets mentioned above — only those hosted on trading platforms to see how risky it is that they’re traded en-masse, resulting in price manipulation.
Being familiar with these indicators can be a life-saver when you start trading for real. If you’re ready to start your crypto journey, register on Your Friendly Crypto Exchange and enjoy a seamless experience.
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