The kind of gains the whole crypto market showed in 2021 is exceptional. This “crypto blast” even affected people who had never heard about cryptocurrencies.
The Reddit community WallStreetBets demonstrated how strong retail day traders could become when working together. Traders all around the world use certain indicators to gain more confidence in their selections. They frequently pair indicators with risk-management tools to obtain more accurate price information.
Are you already interested in indicators for day trading crypto? Stay with us! This article lists some of the best indicators to use as companions in day trading.
What Is a Trading Indicator?
The trading indicator is a tool typically based on algorithms that display historical price data to assist traders in making decisions. It usually gives data on market volatility, trend strength, and overbought or oversold market circumstances. Through mathematical calculation, the indicators provide additional assurance concerning pricing and volume.
For those who don’t have a deep understanding of the crypto market and don’t know how to start day trading, indicators help a lot.
4 Best Indicators for Crypto Day Trading
These are the ones you should check before making a day trade. You can use just one indicator or all at the same time to eliminate the gaps of each.
1. Exponential Moving Average
The exponential moving average (EMA) is a graphical tool used in trading that indicates how an asset’s or security’s price changes over time. The EMA differs from a simple moving average in that it gives recent prices more weight over other factors.
All moving averages are designed to determine how a security’s price is moving based on previous prices. Exponential moving averages are hence lag indicators. They do not forecast future prices; instead, they illustrate the crypto price’s current movement.
They can be observed in various forms, such as 21-day EMAs, 50-day EMAs, and 100- or 200-day EMAs. Prices are more sensitive to EMAs taken over shorter periods. As a result, a 21-day EMA line tracks prices more closely than a 100-day EMA line.
2. Moving Average Convergence/Divergence
MACD, or moving average convergence/divergence, is a trading indicator used in the crypto market’s technical analysis. Its purpose is to detect changes in the strength, direction, momentum, and duration of a trend in the price of a crypto asset.
The MACD indicator might help you spot specific price trends quickly. When the crossing occurs above zero, it usually shows an uptrend. When the corner occurs below zero, it usually indicates a decline. MACD indications can be interpreted in various ways, although crossovers, divergences, and quick rises/falls are the most popular.
3. Average Directional Index
The average directional index (ADX) is the only indicator on the list that does not provide movement direction. An ADX doesn’t show in which direction a particular crypto asset can go. It only shows the strength of the trend in whatever direction it moves and how strong it could be.
The ADX is represented as a single line with values ranging from zero to one hundred. When the ADX line is below 25, it indicates weak bearish or bullish trends, such as a market that isn’t trading or that is ranging, and there is low risk. If the ADX line is over 25, the trend is firmly upward or downward and has significant risk.
4. Average True Range
The average true range (ATR) is an indicator that decomposes the complete range of a crypto-asset price for a certain period to determine market volatility. The ATR is like a moving average of an asset’s price movement calculated for 14 days, although it can be different depending on your approach.
It aids traders in predicting how much an asset’s price will shift in the future and determining how far out a stop loss or profit objective should be placed.
Average true range trading is rarely utilized in manual techniques, but it is frequently employed in developing trading advisors’ risk-managing systems. This indicator does not indicate the strength of a trend and cannot predict a price’s next movements. It simply provides a rough calculation of market volatility.
How to Trade with an Automated Trading System
Obolon9 provides you with a set of already designed scenario-based trading tools (plus a custom scenario) through an automated crypto trading system. The freedom of manual trading and the accuracy of designed scenarios combine the best of both and deliver the desired results.
You may create your first scenario on Obolon9 in five simple steps.
- Name your scenario: Name your scenario based on the coin/token you are trading and the target you are looking to achieve.
- Choose a strategy: For achieving your targets, you have to set up your strategy. You can go for an already designed strategy or customize a specific one for yourself. You can also import one from TradingView (a social network of 30 million traders and investors who use the most excellent charting and analysis tools in the world to spot market opportunities).
- Select a crypto exchange and crypto asset: Choose a crypto exchange and a crypto pair to trade.
- Specify parameters: Complete the remaining asset parameters you want to track in the scenario. Your scenario will only issue alerts/trades if these factors are favorable.
- Click on Save and Run: You’re done; your scenario is already operational.
Indicators for day trading crypto help the trader earn maximum profits and decrease the level of risk. Combining them can be a good idea — this way, you unite their strong sides.
Indicators like the exponential moving average provide information that helps you predict the market’s next move. If you want to automate your trades with a trusted system, you can try Obolon9.