It’s easy to dream of becoming an overnight millionaire by investing in crypto. Some people have, after all, done it. Their work was just buying some bitcoin at the right moment, and that was it – a month later they were planning trips across the world and dinners with celebrities. It’s easy money, isn’t it?
It’s risky money, and it requires a level of understanding of the crypto market that takes months, if not years, to attain. And even then, it’s still risky. The wrong move, or the wrong reaction, could wipe away all your investment.
That doesn’t mean it’s impossible, of course. Just that knowledge is king in this game. Knowing what’s going on in the crypto scene as a whole – and not just around your crypto of choice – is what might let you predict how prices will behave. Might.
It’s All in the Indicators
Indicators are simply insights on the state of the market that might tip you off on a price change. Rather than tips or specific data, they generally come from looking at the bigger picture yourself. There are several indicators most successful traders use that, if you learn to look at, might give you a head start even over the most experienced crypto traders.
Do note that it’s not necessary to use indicators. You might just come across a great tip on an upcoming event to know whether to buy or sell something. Or maybe you’ll just be able to prevent a movement simply looking at the current state of the market. Still, indicators help. And the ones below are some of the best ones you can use.
The Japanese Candlesticks
This is the most basic indicator of the lot. It’s not even a separate tool, but a commonly offered feature of most exchanges. It’s not even a blockchain-only indicator – Japanese Candlestick charts have been used by stock traders for decades. They’re the easiest way to get a birds-eye view of the market as a whole.
Learning to read them is simple. Learning to get signals from them might not be as much, but it will make the process of understanding the general state of the market much easier. Once you get used to them, you won’t even have to think about them – and you’ll be able to quickly gather information from such charts.
Japanese candlesticks work because patterns can tip you off a price change prior to its happening. And since the trick to cryptocurrency trading bot – or stocks – is acting before others do, it’s what will make or break you. In fact, Japanese candlesticks are such a common tool that many indicators use them.
Knowing opening prices, closing prices, and trends are worthless if you don’t know what to tie them to. Sure, perhaps ETH sold at a higher average price today than it has in weeks… but the real question is, how many units were sold?
A price spike or sudden drop is only important if it comes with numbers to back it up. On slow trading days, a relatively small amount of activity can appear as a spike – which will throw you off if you’re not careful. You only want to follow trends if they have enough volume behind them to mean something.
Trading volumes are important enough that they’ll keep you from being manipulated. At times, actors trying to manipulate the market will buy at super high prices, or sell very low, to try and produce a run. Checking trading volumes before reacting to a price change is always the wise thing to do. High volumes usually mean a trend, low volumes -the opposite.
On the other hand, sudden spikes in trading volume almost always mean the market is about to shift. Whether for the better or for worse, that’ll depend on the situation.
Relative Strength Indicators
Along with the two previous indicators, relative strength can help you make an informed decision. While price averages and trading volumes tell you a lot, relative strength indicators can help you know whether a trend is strong or weak.
The RSI is generally used to judge whether an asset is being overbought or oversold. That is, it gives you an actual market confidence status to come with trends.
This is important because you want to be able to predict market corrections – that is, if a price or trading volume is an anomaly. Just as well, it can help experienced traders know when the market is about to shift – and act accordingly.
Are Signals The Same?
Indicators are often thought of as data sheets letting us know the state of the market. For signals, they don’t necessarily follow this rule. In the market, a signal is simply any change in price or activity that might precede a market shift.
For example, if a currency that usually moves low volumes suddenly starts moving a lot of them, that’s a signal. Just as well, a sudden price spike is also a signal.
The thing about signals is, they mean little on their own. Signals are generally things you should look out for, as they might indicate a market change. Usually, you’ll want to act not on a single signal, but on a convergence of them.
That’s what market indicators are for – every indicator will give you signals. When you get several of them towards the same trend, then it might be time to act. We see this a lot with bitmex signals.
The difficult part is knowing when to act. The trick with these markets is acting before events take place. If you’re in a bull market, you want to buy right at the start – and sell right before the price crashes or plateaus.
Just as well, you want to sell right as a downhill trend starts. Sell too soon and you risk the trend being a false signal, price recovering, and losing your probable gain.
If you can’t spend the day scouring the market, there are services that offer you signals. They’ll send you automated alerts when prices or trading volumes spike. They can help for those moments when you can’t give the market your full attention. These work with many crypto trading platforms.
However, be warned: You’re not the only one getting those signals; thousands of people are. Since the trick to the market is acting ahead, relying on these automated systems might lead you to get information too late, as the market as a whole is already reacting.
The best signals, then, are those you can gather and read yourself. Those that can signal a change, instead of those that show the change is happening already.
Author Bio: Denise Quirk is a Health Advisor who is fascinated by Crypto and Blockchain Revolution. She is a believer of transforming complex information into simple, actionable content. She is keenly interested in finding the value of the crypto world. You can find her on Linkedin, Twitter and Facebook.