You’ve probably heard about trading indicators and you’ve been using them without much of a plan. Let’s get specific about how trading indicators can help you better manage risk, find entries and exits and best of all – bring you peace of mind and release you from watching the charts all day.
Trading Indicators can help you make better trading decisions by providing insights into the market’s behavior. And, they can serve to deepen or to correct your own mistaken cognitive biases, so they must be used with care and objective planning.
Trading indicators are used by traders to identify trends and momentum – but when mixed in the wrong way, the result in different potential trading opportunities within the same chart pattern.
For example, one indicator may be showing an uptrend, while another indicator may be showing overbought conditions and flashing a sell signal.
New traders may not know which indicator to trust in which situation, leading to indecision and confusion.
Unexpected short term situations can have a huge impact
on the success of what could have been a good a trade.
When unexpected news or events occur, small traders may react too quickly and change their positions because of a sudden but small timeframe price movement in the market. This can make it difficult for small traders learning to manage risk and refrain from over trading.
Four Indicators That Work Together
In this article, we’ll take a closer look at a set of four free trading indicators available with a free tradingview account.
- We uncover how they can work together to verify the famous trend change pattern… The 1-2-3 Formation.
- We’ll also discuss how they help with better risk control and better profit taking levels.
So, whether you’re new to trading or a seasoned pro, I hope this short introduction to a few free tradingview trading indicators will also help you improve an aspect of your trading strategy!
What Are Trading Indicators?
At the base of it all, indicators are mathematical calculations that are based on a set of data – in our case the price and/or volume of a cryptocurrency, stock or a commodity. An unlimited variety of indicators are used by newbies and professionals to analyze the market’s behavior and to identify potential trading opportunities. Trading indicators can be categorized, and each category provides different variations of insights into the market.
Some of the most common trading indicators include moving averages, bands and channels, candlestick analysis, harmonic patterns, oscillators, pivot points, wave analysis, and trend lines… the list of indicators goes on!
Moving averages are used to identify trends, while oscillators are used to identify momentum. Trend lines are used to identify potential support and resistance levels. Band and channels can identify reversal points and counter-trend signals.
When used together with a trading plan founded on a proven risk control approach, this combination of trading indicators can unlock a new confidence in your entries and exits!
How Do Trading Indicators Work?
Trading indicators work by analyzing past market data to identify trends and potential trading opportunities. They are based on mathematical calculations, and they can be customized to adjust the risk parameters for all Five Stage Of The Trade.
Indicators Work Together
We use indicators as one of the three criteria to identify specific and objective changes in Altcoin each cryptocurrency to build our Crypto Smartwatch AltSeason index.
For example, our popular AltSeason indicator might be set to look at the price of a crypto over the past 30 days.
The indicator then calculates two different exponential moving averages of the price over that period.
Different Types of Trading Indicators
There are many different types of trading indicators, and each one provides different insights into the market. Here are a few of the most common trading indicators and a link to the basic definitions for each.
- Moving Averages – Moving averages and Exponential Moving Averages are used to identify trends in the market. They are calculated by taking the average price of a security over a specific period of time.
- Oscillators – Oscillators are used to identify momentum in the market. They measure the difference between the current price and a moving average.
- Relative Strength Index (RSI) – The RSI is an oscillator that is used to identify overbought and oversold conditions in the market. It measures the strength of a security’s price action over a specific period of time.
- Trend Lines – Trend lines one of the many chart patterns that can be used to identify potential support and resistance levels in the market. Trendlines are drawn on a chart to connect the higher highs or lower lows of the price.
- Bollinger Bands – Bollinger Bands are used to identify potential breakouts in the market. They are calculated by taking the standard deviation of a security’s price over a specific period of time.
We combine these indicators with three things:
- our trend following trading plan,
- our risk control rules and
- our diversification strategy
to create a profitable, low risk approach to crypto that anyone can actually follow!
How Can Trading Indicators Help You Make Better Trading Decisions?
Trading indicators can help you make better trading decisions by providing insights into the market’s behavior.
They can help you identify trends, momentum, and potential trading opportunities.
Here are a few ways that trading indicators can help you improve your trading strategy:
- Identifying Trends – Moving averages and trend lines identify trends in the market. This can help you determine whether a security is in an uptrend or a downtrend, and can help you trade better.
- Identifying Momentum – Oscillators identify momentum in the market. This can help you determine whether a crypto is overbought or oversold.
- Identifying FAKEOUT Breakouts – Bollinger Bands identify fakeout breakouts and reversals in the market. When the bands tighten, it indicates that the token price is trading in a narrow range. This can help you identify breakouts from the fakeouts and reversals.
- Confirmation of Trading Signals – Trading indicators confirm trading signals. For example, if a cryptocurrency is showing an uptrend, but the RSI is showing overbought conditions, it may be a signal to sell the token. By using multiple indicators, you can confirm trading signals.
- Risk Management – Trading indicators help manage risk by identifying potential stop loss levels so you take losses when they are small. For example, if a crypto is trading below a key support level, it may be a signal to exit the trade and cut your losses. By using trading indicators to identify potential stop loss levels, you can manage your risk and make better trading decisions.
Can Indicators Actually Automate Your Trading?
Trading indicators are powerful tools that can help you make better trading decisions. They provide insights into the market’s behavior and can help you identify trends, momentum, and potential trading opportunities.
By automating your crypto trades with tools for risk management, and portfolio rebalancing, you can focus on your life while your money works for you watching the price charts all day.
Three well known crypto portfolio automation services:
- Shrimpy: Shrimpy is a portfolio management and trading automation platform that allows users to create custom trading strategies and automate trades across multiple exchanges.
- BitGetCopyTrader.com: Copy the trades of those with a proven record.
- 3commas: Find managed crypto portfolios to follow or set up your own automated strategy.
By using trading indicators in conjunction with other trading strategies, you can improve your trading performance and achieve greater success in the market.
However, it’s important to remember that trading indicators are not foolproof and should be used in conjunction with other forms of analysis. With the right approach, trading indicators can be a valuable addition to any trader’s toolkit.