Before we go into the details of the best indicators, we have to first understand what indicators are.
Indicators are instruments used in technical analysis to assist traders in predicting price activities. Simply put, indicators use mathematical algorithms to provide traders with what the market will probably do next.
Top Five Bitcoin Indicators
1. Ichimoku Clouds
The Ichimoku Cloud is a collection of 5 lines, with each line indicates historical averages, and the timeframe can be defined by the trader. In a case where 2 of the lines intersect, the space between the lines is shadowed thereby creating a “Cloud”.
There is an uptrend when the price is above the Clouds and there is a downtrend when the price is below the Cloud. However, in a case where the Cloud is flowing in tandem with the price, it is an indication that the trend is powerful.
2. Relative Strength Index (RSI)
This is one of the easiest indicators to use. This indicator shows when an asset is overbought or oversold. RSI utilizes past data in deducing the gross need for an asset. It also deduces if an imminent correction is going to occur in either direction.
3. Moving Averages (MA)
A Moving Average is an indicator that evaluates the average price based on a timeframe, reevaluating it as time goes on. A Moving Average is also necessary for deducing support and resistance level.
Fibonacci, just like moving averages, is valuable when deducing the parameters of price activity. Even though Fibonacci might not be as intricate as some other indicators, it merits a spot on one list because of its uniqueness. The Fibonacci percentages are naturally occurring details and can be seen even in nature.
Naturally, anytime there is an abrupt change in direction in the price, a reversal towards the trend always seems to come next.
Volume is undoubtedly one of the most vital although underrated Bitcoin indicators. This indicator reveals the number of traders buying and selling Bitcoin. It is always advisable to examine Volume before getting into a trade based on any other indicator.
Azeez Mustapha is an experienced author, trader, markets analyst, signals strategist, and funds-manager.