What is Trading Indicator ?
Trading indicators are mathematical calculations, which are plotted as lines on a price chart and can help traders identify certain signals and trends within the market. There are different types of trading indicator, including leading indicators and lagging indicators.

Indicators are used in timeframes and currency pairs. The right combination of indicators can help build an effective and more profitable trading strategy for investors.

For many traders, Indicators are indispensable in the trading system.

Below is the list of 4 Indicators that every investors can use in the process of analyzing market fluctuations

EMA (Exponential Moving Average)

The Exponential Moving Average (EMA) is one of the simplest but most effective technical tools and is the most widely used tool in the world. But why choose EMA instead of MA or SMA (Smoothed Moving Average) ?

This is because the EMA will focus on the closest price parameters rather than in the past, thus more accurately reflect what is happening now, and filted out more noise signals.

Crypto investors know that cryptocurrency is a fast-moving market, so the price data will quickly become obsolete, and focusing on the latest data will naturally be more effective than looking too long at its past.

In the trading system, investors should use 1 fast line (EMA 50) and 1 slow line (EMA 200).

The fast line will respond to the faster price acting as a signal, the slow line will mark important support/resistance areas. Typically investors usually use the following signals with these 2 EMA lines :
  • Dynamic support / resistance
  • Bullish / Bearish crossover : Bullish crossover occurs when the EMA 50 crosses the EMA 200 from the bottom up, which is a sign of an uptrend in the medium termm (also known as the Golden Cross), a bearish crossover is a cut from the top to be a sign of a downtrend in medium term (also known as Death Cross)
  • Identivy the medium-term trend : In addition to the crossover above, the direction of these 2 EMA lines also tells the medium-term trend. If in the uptrend, the EMA 50 bend down means the trend has weakened, possibly reversing.

Bollinger Bands and Keltner Channel

Bollinger Bands and Keltner Channel are responsible for measuring current volatility in the market and overbought / oversold levels.

Bollinger Bands

Bollinger Bands is a great tool. Millions of traders around the world trust and use it as an indispensable part of their trading life. Like other classic indicators, BBs have lots of useful features. One of those features, I think is unique and no indicators is available, which is the bottleneck phenomenon of Bollinger Bands.

The huge volatility of the crypto market makes Bollinger Bands very well promote its strenghts. When two bands expand, the market is highly volatile, and when they shrink, the market is accumulating, preparing to go strong in one direction. Depending on the volatility we will have different trading strategies.

Keltner Channel

Investors should use the Keltner Channel to assess the overall situation of the market is overbought or oversold, so as not to be chsed by F.O.M.O (Fear Of Missing Out, a common problem of crypto traders)

When the candlestick closes outside the Keltner Channel upper band, the market is overbought, the price is likely to bounce back; opposite of the lower band.

The Keltner Channel is more effective in this market than RSI or Stochastic because it takes the candle as a signal, and the other takes the price data and calculates so will be slower or have a deviation.

Investors should not use these 2 indicators to forecast trends, the lower band type is Buy, touching the upper band is Sell, with that way of thinking when trading will bring a lot of risks for investors.

RSI, MACD, Stochastic

These indicators only have a common name is Oscillator, or quick indicator. Their task is to predict short/medium-term trends

They can help investors know the weakening signals of the trend, reverse the trend, start a new trend. They also tell us whether the market is oversold or overbought. They are generally very useful.

RSI

The strength of RSI is for divergence signals. A bullish divergence occurs when prices make a lower low, but RSI creates a higher bottom, indicating that that the downtrend has weakened and is about to reverse.

In contrast to the bearish divergence, this signal when combined with a price model is very reliable. In addition, you can also use RSI to measure overbought/oversold.

MACD

MACD is also likely to diverge as RSI, but less likely. Its strength is predictive of trend when there is bullish/bearish crossover.

Stochastic

Similar to MACD but with the function to measure overbought/oversold.

These indicators have similar functions so investors only need to use just one or two. Previously investors used MACD but now switch to Stochastic because it measures overbought/oversold better, and also the possibility of divergence of RSI.

Volume

An indispensable part - Volume is the most important confirmation signal that I rely on, because the price after completing the pattern that pops up with a weak volume, or is both not prominent, needs more observation, does not enter now.

Every investors always needs a break out of the pattern with a volume that surpasses the previous volume, a gentle bounce and quickly find support below, which a good time to enter.

Of course, we should not add all these indicators to the chart because it will be very confusing, each type of indicator has a different function and strengtht. You should find out which function is suitable to your trading system, choose and use it.