In online trading, participants cannot gain successful results without applying special tools. Indicators are the most frequently-applied instruments during online trading. They help to foresee the quote behavior and act in accordance with the situation. These solutions are useful in both long-term and short-term strategies, so if one speculates on cryptocurrencies, one must know which instruments, when used correctly, help to generate the biggest crypto profits.
Thanks to technological progress, the selection of indicators is pretty extended. To aid you in making the best choice, we will try to discover the most accurate one. Our decision was made upon studying the opinions of the industry experts. Usually, they determine the best 10 crypto indicators. In this short review, we decided to specify our top 5 favorites and find out the best one.
Relative Strength Index (RSI)
RSI is helpful when a user needs to figure out the strengths and weaknesses of a crypto asset during the period when costs are alternating. Particularly, it shows participants if the buys and sales of the chosen cryptocurrency are going beyond.
The major advantage of the RSI solution is that it doesn’t require sophisticated skills from a trader. It’s not very difficult to adjust this instrument in accordance with your specific system because it applies the common setting of 14 periods or candlesticks. Plus, although RSI might neglect volumes, it can catch the momentum loss quite efficiently. These are the reasons why it might be applied within any system with no difficulties.
Stochastic Oscillator
If your technique involves the calculation of momentum, you’ll down to Stochastic Oscillator technical. The principle of its work is quite simple: chose a particular timeframe and the solution provides a comparison of a certain closing point of your product with a big selection of other costs.
The huge positive side of this digital solution is that it is able to generate efficient signals, meaning a user doesn’t have a necessity to do everything manually. They are quite understandable – when you see that signals higher than 80 points, the asset is overbought, while signals smaller than 20 mean that it’s oversold. Such a tool is considered quite helpful in a range-bound environment because, in a trending environment, its signals might be false.
Moving Average Convergence/Divergence (MACD)
The MACD technical indicator is one of the leading tools in the world of online trading since it’s quite understandable. Crypto traders fancy using the MACD indicator because it gives quite productive trading signals that are efficient in the process of trading automation. MACD is used to determine the difference or similarity between the short and long-term momentum.
This technical indicator relies upon 4 elements:
- the MACD line
- the Signal line
- the Histogram
- the Zero line.
In order to calculate it, you should use the following formula:
26 period EMA (Exponential Moving Average) – 12 period EMA (at closing prices)
MACD is very popular among crypto traders because of its simplicity of use when there’s a need to measure trends. To make the most of using this technical indicator, you might combine it with other indicators. But be attentive because it often occurs that MACD generates false reversals.
Aroon
Aroon is the best instrument out there if you need a tool that indicates the changes in the underlying price of the chosen crypto asset. Aroon was initially designed to determine the strength of a trend. Aroon has two different formulas for calculating its ups and downs:
- Aroon Up= 25-Period Since 25 Period High/25*100
- Aroon Down= 25-Period Since 25 Period low/25*100
To determine the bullish and bearish price of an asset, you should take a look at the positioning of the Up and Down lines. The bullish price is indicated by the higher positioning of the Up line, the bearish one, respectively, by the higher positioning of the Down line.
Although Aroon signals are considered quite efficient for both long-term and short-term trading strategies, they might show poor performance in certain conditions.
On Balance Volume (OBV)
The On Balance Volume’s function is to forecast whether the price of the chosen asset will change. This prediction is based on the analyses of a volume. OBV also provides strong signals that can automatically help to figure out when to buy or sell a certain crypto asset.
The On Balance Volume indicator is one of the most frequently used tools on this list of the best crypto indicators. If you want to use it and its signals productively, we recommend you not choose short timeframes. Plus, don’t rely on this technical indicator if you prefer scalping trading strategies. The best time to use the OBV indicator is when there is a trending market scenario.
Final word
So, above, you see the list of the best 5 indicators for cryptocurrency trading. All these instruments have their advantages and disadvantages. We tried to outline all positive and negative features to help you make the best choice. But the question is “What is the most accurate crypto trading indicator?”
Our conclusion will be that Moving Average Convergence/Divergence (MACD) is the most accurate indicator for crypto trading. It’s known for its reliable trading signals that aren’t lagging even in the most specific market conditions. These strong signals and ease of use are the major reasons why this tool is so popular in such a volatile trading space as a crypto market.
We hope that this review will help you to make your crypto trading strategy more efficient. Stay tuned to learn more insights!
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