By plunging into the basics of technical analysis, we have finally reached the graphs, which scare the pioneers of crypto analytics half to death. In the last material, we talked about volume indicators, relative strength, and the auxiliary Zigzag indicator. Today, we will look at a few more tools that help understand and predict the behavior of the cryptocurrency market.
An instrument as popular as volume. The indicator function analyzes the averaged prices for the selected time interval. The chart is superimposed on the current price chart, which gives a relative picture of the overall price trends.
If the actual price of the cryptocurrency is kept above the moving average for a long time, it can be assumed that it will continue to grow. Accordingly, the drop below the sliding one is a signal to the lowering of the asset’s price.
It is desirable to use several moving averages based on different time intervals for more accurate forecasts. In this case, in the case of disagreements, the value of the average based on a longer period of time is considered to be true. If the signals from several moving averages coincide, we can talk about a fairly accurate forecast.
MACD (Moving Average Convergence Divergence)
Having trained on one moving average, we will pass to the complex analysis of this indicator. The MACD tool analyzes the convergence and divergence of the three moving averages and can signal the start of a new trend.
Pay attention to the graph at the bottom of the picture. The price movement reverses (which is confirmed by the price chart at the top) at the points where the lines intersect.
The MACD also works well on different timeframes and is a fairly simple and popular indicator of technical analysis.
CCI (Commodity Channel Index)
The CCI or Commodity Channel Index, like the Relative Strength Index (RSI), which we wrote about in the past, helps in assessing overbought or oversold assets. This chart with values from minus 100 to plus 100 is displayed below the current price chart and can be applied on any timeframes.
The CCI above a hundred indicates that the asset is overbought and price reduction is about to occur. On the contrary, the CCI index below minus one hundred indicates that the asset is oversold and its price is likely to increase.
This tool also applies to oscillators and is used during the lateral trend phase, when there is no clear idea of how the price will behave in the near future.
ADC and DI (Average Directional Movement Index and Directional Movement Index)
The ADC and DI indicator is an index of average direction and direction of movement and signals a change of trend. It looks on the chart as three lines, red are bears, green are bulls, blue (on different platforms there may be other colors) are the strength of the trend.
This indicator is quite reliable on the four-hour and daily frames. If the trend strength line is within 10 to 20 points, this indicates that the trend is gaining momentum; if the indicators reach 60 to 80 points, we are waiting for a trend correction. The green and red lines will show who sets the mood on the market, the bulls or the bears. If the green line crosses red, the trend becomes bullish, and vice versa.