TECHNICAL INDICATORS-Crypto Academy/S4W2- Homework Post for @reminiscence01

Technical Indicators And Why It Is A Good Technical Analysis Tool

Technical Indicators are mathematical algorithms used to gauge price movement. It is used to determine major reversal, trends, entry points. They are basically used to confirm price movement.

Technical analysis is made up of price movement and indicators. Indicators are used to determine entry point(buy and selling ) exit point(take profit and leave or when market odds are against you). Price is the most important aspect of technical analysis.

Are Technical Indicators Good For Cryptocurrency Analysis? Explain your answer.

The use of indicators cuts across the whole financial market ranging from stocks, indices, synthetic indices and cryptocurrency with the use of graphical representations.

Technical indicators are good for cryptocurrency analysis. In trading the use of technical indicators is broad ranging from trend confirmations, reversals, entry and exit point .It is a guide to know what is happening in the market. Depending on the market, the indicator guides you on how to properly take advantage on market price movement, to know when to invest and when to take profit and cut looses.

How To Add Indicators On The Chart And Also How To Configure them

On a trading view chart click

• Step 1: click on the Indicators

• step 2: Search for the indicator. In this case Moving Average

The Moving Average indicator appears(The blue color)

_{Moving Average Indicator: BTC/USDT}

• step 3: To configure indicators, you need to tap on the indicator and the setting icon appears
  click on the setting and configure

You can customize your indicator ...
From the input you can make changes to your indicator , visibility and style( you can change the indicator to your preferable color).

Different Categories Of Technical Indicators And Example

Trend Based Indicators

The trend based indicators are used to confirm market trend. A good example is the Moving Average. Let's take a 200 moving average. When the price is above the 200 moving average this means the market is in an uptrend(buy entries are valid). Note:Indicators are best used on higher time frames this is because the market has less noise.
_{The moving average can be configured depending on the traders choice}

Some examples are:

• Moving Average
• On-Balance Volume(OBV)
• Average Directional Index(ADX) etc.

Example of Moving Average on the Chart

_{Moving Average Indicator: BNB/USD chart}

---

Volatility Based Indicators

Volatility Based Indicators measure deviations .They are best used in ranging markets to confirm range Swing High and Swing Low. In an uptrend where the price stops is swing high(maximum point the price touched during an uptrend ) and wherever the price stops while going low is the swing low. Traders can buy at swing low, and sell at swing high. However, It is not advised to use the volatility Indicators to trade alone in technical analysis.

Some examples of the Volatility Based Indicators are:

• Bollinger bands
• Average True Range(ATR)
• Keltner Channel etc.

Example of Bollinger Indicator on chart

_{Bollinger Indicator: BTC/USDT chart}

---

Momentum Based Indicators

Momentum-Based Indicators are used to confirm trend strength. This is good indicator to know when an asset is overbought or oversold. When a market is at an overbought region this means the buy momentum is high. Giving entry points on when to buy and when to sell, which is greatly based on the supply and demand of the asset.

Some examples are:

• Stochastic
• Relative strength index (RSI)
• Moving Average Convergence Divergence (MACD).

Example of Stochastic Indicator on chart

_{Stochastic Indicator: BTC/USDT chart}

Why Indicators Are Not Advisable To Be Used As A Standalone Tool For Technical Analysis

It is not advisable to use Indicators independently for technical analysis because, they are best used as confirmations and not the bases of analysis. Helps to confirm your decision and not to be used solely for making practical judgement on investments. It is best to combine it with other Technical Analysis tools.

How An Investor Can Increase The Success Rate Of A Technical Indicator Signal

For an Investor to increase the success rate of a technical indicator signal, technical analysis should not be based on the indicators rather use it as confirmation tool to best aid in decision making. Also, by knowing the best indicator to use to support your style of trading while using it properly and accurately.

Some technical indicators work best together , to analyze the past and anticipate the future price trends for the best trading opportunities. Combining indicators will give you more accurate signals.

Conclusion

Technical indicators are essential tool in technical analysis. However, it is best advised not to use it as a standalone tool in trading. Bearing in mind that the signals from the indicators might not always be true and to use them only as confirmation tools.
Thank you professor @reminiscence01 for this lecture.