Top Trend, Momentum, and Volume Indicators You Must Know!

2021/11/21 08:07:09

For most traders, technical analysis forms the basis of their trading or investing decisions. It doesn’t matter if you are a day trader, swing trader, position trader, or scalper; technical indicators are invaluable. However, most traders tend to make the cardinal sin of filling their trading charts with several indicators. Contrary to popular belief, when it comes to technical indicators, more isn’t always better. If you must use multiple indicators, it is often advisable to use indicators that perform different functions.

Trend Indicators

As the name suggests, these indicators only show the direction of the price action – uptrend, downtrend, or a non-trending market. They analyze the current trend in the market. Is there a sideways phase, or is there a strong trend? The indicator indicates which trend you are in. Trend trading is a method that aims to make profits by examining the dynamics of a tool in a particular direction. When the prevailing price movement points up or down, it is called a trend. The best trend indicators include:

Moving Averages (MA)

Use this indicator to determine the current trend. It can also be used as support and resistance if the chart is above the line = uptrend, the chart below the line = downtrend. With the right setting, enormous results can be achieved here.

Moving Average Convergence/Divergence (MACD)

MACD: It shows you when a new trend has started and when it may have ended. The intersection of the two lines indicates a change in trend. Typically, this indicator is suitable for determining longer-term trends.

The elegance of the MACD is that it shows both trend and momentum. When the MACD is above the signal line, it shows a strong bullish momentum, and when the MACD is below the signal line, it shows a strong bearish momentum

Commodity Channel Index (CCI)

The CCI is one of the best-known oscillators for measuring trend reversals. Here, the deviation of the value of an asset is related to its statistical average.

Parabolic SAR

The Parabolic SAR indicator is a typical trend following indicator suitable for trailing stops or manual shifting of the stop loss. A complicated formula displays the points in the chart. It is well suited to identify and act on a trend.

Momentum Indicators

Momentum indicators indicate when the market is overbought or oversold. This can be used very well for reverse trades or position closures. In their basic form, they are used to show the strength of the current price action. That means you can use the momentum indicators to easily identify the areas of potential reversals and catch trends just when it’s starting to form. The best momentum indicators for the crypto market are:

ATR – Average True Range

The ATR (Average True Range) indicator measures volatility over a given period. Volatility means how many points of movement the market makes. There are volatile markets and markets with less volatility. The stronger the movements, the more profit or loss can be made.

The Stochastic Oscillator

This oscillator has two (exponential) average lines called the %K line and %D line, oscillating between 0 and 100. When the stochastic is above 80 shows an overbought market, and you should search for short-selling signals, and when it’s below 20 shows an oversold market, and you should look out for buy signals.

RSI – Relative Strength Index

The RSI measures the speed and extent of current price movements. The indicator is based on the principle of average increases and decreases, with an oscillator ranging between 100 and 0. RSI value above 70 shows an overbought market, and you should search for short-selling signals, while the RSI value below 30 shows an oversold market, and you should look out for buy signals.

Volume Indicators

In the crypto market, nothing shows the market sentiment better than the volume traded. The volume indicates the level of activity in the market. The assumption that the volume runs ahead of the prices is the basis of volume analysis. In an uptrend, the volume should increase in phases with rising prices and decrease in the case of falling prices. In a downward trend, the volume is expected to increase with falling prices and decrease in phases with rising prices. The best volume indicators include:

The Money Flow Index (MFI)

The MFI is a volume-weighted RSI. Essentially, this is a link between price/price and volume on the one hand and the momentum analysis, on the other hand, to assess the current buy and sell pressure.

On Balance Volume (OBV)

The OBV is a cumulative volume indicator in which price/price and volume are related. It is unique because the values do not play a role in the indicator.

Bottom Line

Indicators use mathematical formulas to analyze the past price action and forecast the trend. To increase the accuracy of your trading decisions, you should combine at least three indicators, each showing trend, momentum, and volume.

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