Finance

Indicators For Crypto Investment: What Are They?

Crypto Investment

Indicators do a fantastic job of predicting new prices with the help of the analysis of past price movements. In this bitcoin era, it’s very important to be thorough with analysis. All specialized crypto investors always do the prerequisite technical analysis before they invest in any coin. Indicators play an important role in technical analysis. They go a long way in preventing investors from making emotional or rash investment decisions. The scientific methods used in technical analysis allow investors to make the right decisions. Numbers never lie after all. Now, let’s find out more about them.

Indicators: All You Need To Know

Investor psychology is the most important factor to “win”. Acting emotionally, investing completely based on the comments made on the platforms without having technical knowledge are listed as the reasons that most affect the loss of investors. In order to avoid such situations, it is necessary to master the subject of technical analysis. The most used tools in technical analysis, or to put it more simply, indispensable indicators are indicators. So, what exactly are the indicators for, how are they used, why and how important is it to look before investing?

What is an indicator?

An indicator is the name given to the indicators that enable the movement in the prices of any commodity, money or crypto money in the money markets and to make analysis and predictions about many subjects. You can think of indicators as a roadmap. Thanks to this roadmap, you can see where you should go, how you should go, and in which direction you should move. From this point of view, professional investors should definitely act by considering the indicator issue in technical analysis before trading.

Indicators are formed on the charts where the volatility (increase) in the prices is shown. Cryptocurrency investors try to reach a conclusion with the indicators on these charts before they buy and sell.

What is the importance of indicators in investment?

Indicators are of great importance in buying and selling transactions in the crypto money market or other investment areas. For this reason, if you want to invest money in any financial field, you must first determine the indicators that are most suitable for you and that you can make your decisions in the most accurate way. If you manage to take advantage of the advantages of the indicators, we can say that you will benefit a lot in terms of investment.

Do indicators give accurate information?

Most novice traders or people with low technical analysis knowledge act on the indicators they have learned. This is very wrong because it is not the right decision to trade immediately after looking at the indicators. First of all, you should come to a conclusion by examining the indicators on the charts, and then you should wait for the prices in the market to match your prediction. In other words, it is necessary to have fundamental analysis knowledge along with technical analysis.

How many types of Indicators are there?

Indicators are generally examined under 4 different headings. These;

Volume and currency indicator?

There are many types of indicators used in technical analysis. One of these indicators is the volume and currency indicator. The volume and money indicator are indicators used in the evaluation of the data of price volume and other factors affecting price activity while making an investment decision by making mathematical calculations while performing technical analysis.

Volume indicators alone do not represent a direction. For example, when we look at the chart, if a short-term volume average appears and this short-term volume average exceeds the long-term moving average, this indicates that prices will rise.

Trend tracking indicators

Trend-following indicators are indicators that follow the direction in which prices change over time. The purpose of these indicators is to predict the direction of price volatility. This indicator, which has very successful effects in directing the investment psychology of investors, is one of the most important indicators used to predict how prices will move in the future with instant volatility.

Volatility indicators

One of the most important indicators in the cryptocurrency market is volatility indicators. With volatility indicators, fluctuations in prices can be observed. High increases and decreases in prices can be predicted. Using the volatility indicator before investing allows you to make more accurate investment decisions away from any emotional effects.

Momentum indicators

Momentum indicators help you predict future price changes. Momentum indicators give a “BUY” signal to investors when prices dip and then turn upwards. If the indicator has peaked and started to move downwards, this signals a “SAT” order to crypto traders.

When the momentum indicator is considered, a bottom or a peak indicates that the trends will continue, but the rate of increase in prices has decreased and the factors that increase the value of commodities begin to weaken.

You should change your current position by waiting for the price movements to occur before taking action as a result of the “buy” and “sell” signals given by the momentum indicators. For example, you got an investment idea by examining the indicators and you got some predictions about the volatility that may occur in prices. When you look at the market later, even if the price activity is moving in the direction you predicted, this does not mean that the prices will continue in the same direction. Even if you see a movement in the direction you expect in the prices, you should wait and make sure that the price will continue in the same direction when moving up or down. It will be better for you to make an investment decision later.

How should indicators be used?

It is very important whether the data formed as a result of support and resistance in the charts match the prices. If there is a discrepancy between the data and the prices, positive or negative discrepancies are detected by looking at which trend it is in, and as a result, it is seen whether the rises and falls in the charts are real. So let’s say you made a guess about prices; In this case, first of all, the prices in the market should have started to take shape in line with your predictions so that the accuracy of your predictions will increase.

Which indicators are the most used?

In the crypto money market, one does not act by looking at a single indicator. Indicators consist of various indicators determined by the analysts themselves, and as a result of determining the ones that give the correct result, a logic is created, or in other words, a special indicator is created. However, these are not the road maps drawn by the analysts themselves, but the indicators given at the ready. Of course, this is considered a special issue, in general, there are some indicators that investors use most, these are:

Moving Averages

Moving averages are one of the most used indicators in technical analysis by investors. This tool is used in technical analysis to show how far future prices are from trends by looking at chart data from the past. When the price averages formed in this indicator are cut in an upward direction, the “BUY” signal is cut in the down direction, but it is understood that it is a “SELL” signal and acts accordingly.

Simple Moving Average

The simple moving average, which is among the moving average types, is obtained by calculating the total value of the closing price by dividing it by time. When calculating the 10-day average, the closings of 10 days are added and divided by 10.

Exponential Moving Average

Today’s exponential moving average is found by adding it to yesterday’s exponential moving average with a percentage formed and determined today. The result is obtained by using the formula 2/(1+determined time period of the moving average).

Variable Moving Average

The variable moving average, which gives a clearer signal than other moving averages, produces a more sensitive signal in a certain range of prices in the horizontal market.

Triangular Moving Average

The weight of the days in the middle of the number of days determined in the calculation method is higher. The triangular moving average is a type of indicator that is frequently used in technical analysis and helps to get more efficient results in signal reception.

RSI Indicator

The RSI indicator, which gives information about the overbought-sells of prices, was discovered in 1978 by a person known as J. Welles Wilder. This indicator, which consists of two border lines at the 30 and 70 levels, is one of the most used methods in the cryptocurrency market.

Bollinger Band

Bollinger Band is named after John Bollinger, its creator. It is a type of indicator used by looking at the value of the average deviation of the current prices, the prices that occurred in the past, and the lowest and highest value lines of the current prices.

Stochastic Indicator

The stochastic indicator is the name given to the analysis method that shows the closing in the prices, the highest value of the prices, the lowest value of the prices and the turning point of the price movement in the value change. Stochastic Indicator, which is a very successful method, gives signals about overbought and oversold in the cryptocurrency market. The Stochastic Indicator is a type of indicator that consists of two lines shown as  %K and %D.

Indicator FAQs

Are the indicators alone enough to make an investment decision?

Indicators are indicators used for technical analysis in forex, crypto or other investment instruments. However, it is not right to make an investment decision only with technical analysis, it is also important to evaluate market news, that is, to make a fundamental analysis.

How should the indicators be read?

Each indicator gives different information. Therefore, the reading of each indicator is different. It is not right to act without training on this subject.

Are the indicators reliable?

If the traders (investors) have enough knowledge and experience in technical analysis, of course, the indicators become reliable. However, since the interpretability of the indicators completely depends on the experience of the person, whether they are reliable or not also depends on the person who reads them.

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