Crypto Academy

4 types of indicators

4 types of indicators

3 min reading

Have you ever known about tendency, momentum, volume, and volatility? It is time to find out!

types of indicators

4 types of indicators: tendency, momentum, volume, and volatility

Price moves in the cryptocurrency market, like those in any other market, are not random; rather, they frequently reflect long-term and short-term trends. Cryptocurrency traders apply technical analysis to try to identify and react to these trends. Traders, relying on technical indicators, place more emphasis on coin price changes than on fundamental factors. However, fundamental aspects also have a huge impact on price rates. While a variety of factors might influence the value of a cryptocurrency, technologists pay close attention to supply and demand.

What are technical indicators?

Indicators relating to financial instruments are displayed using technical indicators. Usually, they are based on price, volume, on-chain data, open positions, social indicators, or any other metric. Using technical indicators, traders choose the right moment to enter the market and make a profitable deal. Important to note, that there is no tool to guarantee a 100% profit since indicators are just helping tools. Moreover, with the help of technical indicators, traders can forecast the price movements or understand the current market situation. For now, there are available 4 types of technical indicators such as trend, momentum, volume, and volatility indicators. 

Trend 

Trend indicators allow you to predict the emergence of a trend and its direction. It is important to know which way the price is moving at any particular time. In the crypto market, trends are local and global. Global patterns are appropriate for medium- to long-term trading. The key goal is to recognize an uptrend when traders observe a series of higher highs, and a downtrend when they see a series of lower lows. Also, if the indicator shows that the price is above the indicated average, it is a good sign for a bull market; if the indicator shows that the price is below the stated average, it is a negative sign for a bear market. Moreover, trends include such well-known indicators as Moving Averages (Simple AM and Exponential AM), MACD, KAMA, etc. This isn’t a complete list of trend indicators. We always specify which group this or that indicator belongs to in our Academy articles. 

Momentum 

Momentum indicators assess and demonstrate the extent of price tendencies. What exactly is market momentum? In non-scientific terminology, it is a measure of the pace at which prices change. Momentum analyzes the rate of price rising or falling. As a result, they are typically used in the short-term analysis by traders looking to capitalize on volatility surges. The trader’s purpose is to enter the market when momentum is high and leave when it is low. When volatility is low, prices tend to stay in a limited range. When volatility rises, price frequently makes a large momentum surge outside of the range. The momentum indicator is the gathered category of such indicators as RSI, Stochastic, Stochastic RSI, MACD (this one describes both trend and momentum), etc.

Volume

Trading volume is also significant in determining trends. Significant trend developments are typically accompanied by large trading volumes, while weak trend developments are typically accompanied by low trading volumes. When a crypto-asset declines in value, the first thing to do is examine the volumes that accompanied the decline. Long-term uptrends are typically characterized by high increase volumes and low drop volumes. It is also critical that volume growth maintains its speed. When trade volume falls while crypto-asset prices rise, the uptrend is likely to terminate, and vice versa. Indicators of volumes include OBV, Price Volume Trend, Volumes, etc.

Volatility

Volatility indicators measure the range and speed of price movement based on an average directional value. In other words, they illustrate how quickly and in which direction price is moving in comparison to the average chart. This type of indicator is useful when you need to evaluate the volatility of an asset while prices are moving in either direction and give a range of price points based on the risk of breaking those points. As you may already know, the cryptocurrency market is extremely volatile, so volatility indicators will be quite efficient. Therefore, this category includes  Average True Range, Bollinger Bands, Historical Volatility, etc.

How to use it on bit4you

The bit4you trading platform is pleased to provide its customers with the most variety of trading indicators to facilitate cryptocurrency trading. Therefore, knowing what types of indicators are, you can easily identify the best for you and build the most convenient strategy. All necessary tools you will find in the Indicators section in the trading terminal. Reading educational articles about the indicator you are interested in, you find all the information about it and how to use it on the bit4you website. 

However, traders can apply a variety of indicators, and the one they select is primarily determined by their specific trading approach. To make that decision, you must first learn more about indicators, which is what this article is about.

Conclusions

OBV

OBV

4 min reading

What is an On Balance Volume indicator and how to use it on bit4you described in this article.

OBV

OBV

In 1963, Joseph Granville, a famous trading theorist and practitioner, introduced the On Balance Volume trading indicator in his book “A New Stock Market Strategy”. Nowadays this indicator is still relevant and remains one of the most popular ones. In this article you will learn about the On Balance Volume indicator, how to use it, customize it, identify signals, open and close positions.

What is an On Balance Volume indicator (OBV)

The balance volume is the simplest, elementary technical indicator that characterises the dynamics of trading volume. Its peculiarity is that the indicator does not interact with the price, as always, indicators apply, but operates directly with the trading volume, using close-out prices indirectly only. The indicator has an accumulative effect and is used in technical analysis to estimate the pressure exerted by buyers (bulls) and sellers (bears) on the market. This indicator is one of the first indicators, evaluating positive or negative financial flow, connected with trading. Subsequently, analysts began to use it extensively, to get signals based on OBV and price divergence, as well as to confirm a trend. 

How to use it on bit4you?

To understand how to apply this indicator you will need a trading platform. Let’s explore it on our bit4you trading platform. First, you need to choose the asset you are looking for and a price chart for the specific timeframe will appear. The OBV does not give unambiguous signals on its own, but only confirms the signals of other indicators. The quantitative value of OBV is not as important as its directionality. Graphically, the indicator looks like a curve displaying the change in accumulated amount as described above. So how should it be used? If you need to calculate the balance volume, the first thing to do is to check today’s closing price against yesterday’s closing price. Then you can add today’s volume to yesterday’s balance volume, assuming today’s close is higher than yesterday’s. However, otherwise, you will have to subtract today’s volume from yesterday’s. You can only change nothing if today’s closing price corresponds to yesterday’s. You can only change nothing if today’s closing price corresponds to yesterday’s.The graph clearly shows how the graph of balance volume corresponds exactly to the graph of price. If the balance sheet volume increases at the same time as the price, it indicates the strength of the trend to a large extent, as it shows that there is an intensive inflow of capital into the market of this particular instrument. In case you notice a divergence in the price and balance sheet volume movements, become more sceptical of the trend and wait for the indicator to move backwards. In other words, if the price goes up and the indicator goes down, wait for the price to fall and vice versa. However, you should understand that the absolute value of the indicator does not play a significant role. It is more important the direction of the balance volume.

Formula

The formula for On Balance Volume is quite simple. For example, if today’s closing price is higher than yesterday’s closing price, OBV is equal to the sum of previous OBV and volume for the period: OBV i = OBV i-1 + Volume i;

If today’s closing price is lower than yesterday’s closing price, OBV is equal to the difference of the previous OBV and volume for the period: OBV i = OBV i-1 – Volume i;

If yesterday’s and today’s closing prices are equal, OBV is equal to the previous OBV: OBV i = OBV i-1. Where: OBV i – Volume of the current period; OBV i-1 – Volume of the previous period; VOLUME i – Volume of the current candle.

However, the Balance Volume indicator (OBV) is a fairly simple but quite informative and handy tool that allows you to get a clearer picture of where the market is heading. The main advantage of the indicator for trading is its ability to generate lead signals that you can use when building trading systems in conjunction with other indicators. Among disadvantages it is worth noting that the indicator aims mainly at the stock market and in the process of trading it can give out a great number of erroneous signals. In addition, the Balance Volume (OBV) is useful as a tool, providing information for consideration, but not for making trades with it.

Conclusions

MACD

MACD

4 min reading

Find out what MACD is and how to use it on the bit4you platform in this article.

MACD

MACD

Today traders have a multitude of tools for technical analysis at their disposal – standard and original indicators. From the choice of an indicator or its complex, using which one can unambiguously interpret the character of price chart conduct, decide when it is better to enter the market and close positions, calculate their movement targets and loss fixing levels. All this is seen as a foundation for trading systems and strategies. Moreover, even in standard trading platforms there are effective indicators, such as MACD. For more information, read this article.

What is MACD?

The MACD is a type of oscillator and a technical analysis (TA) tool that traders use. The MACD stands for trend-following, utilising moving averages to detect the stock’s momentum, cryptocurrency or other exchange-traded asset. Before looking at how the MACD works, it is important to understand how moving averages work. A moving average (MA) is a simple line showing the average of the previous price within a particular period of time. When it comes to finance markets, moving averages (MAs) are one of the most general indicators for technical analysis. There are two different types of them: simple moving averages (SMA) and exponential moving averages (EMA). SMAs take into account all of the raw data equally, while EMAs make greater use of the most recent data (newer price points).

How does the MACD work?

To understand how MACD works, you will need a trading platform. Let’s explore it on our bit4you trading platform, using the demo mode initially. Even though the MACD is an oscillator, due to the fact that it has an average value of zero, it does not have any particular limit, as is the case with other oscillators (such as RSI and Stochastic). Because it has no upper or lower limits, you cannot use the MACD to show that the asset is outbought or outsold. Nevertheless, a MACD that is too high indicates a bearish trend and a MACD that is too low can indicate a bullish trend. There are three components to the MACD chart: the MACD line, the signal line and the histogram for the difference between them. For a simple example, a bullish signal emerges when the MACD line crosses the signal line upwards while a bearish signal emerges when the MACD line falls below the signal line. If you find the MACD line above the baseline it means the trend is up, and if it’s below zero it means the trend is down. If the MACD line crosses above the signal line, it is a signal to buy, while if it is below it, prices may start to fall. 

Before you start working with the indicator on the bit4you platform, you should pay special attention to the choice of parameters that will allow the analytical tool to function correctly. The MACD settings don’t require much effort. The indicator has 4 main parameters: period of a fast moving average; period of a slow moving average; period of a signal moving average; price value for the calculation. When trading on a downside, the MACD is normally set to a period of 26 for a slow moving average, 12 for a fast moving average and 9 for a signal moving average, and the price for the calculation is the value of the closing candle.

Formula

In calculating three exponential moving averages with unequal periods, we use three exponential moving averages. From the fast moving average with a smaller period (EMAs), a slow moving average with a larger period (EMAl) is subtracted. From these values the MACD line is drawn.

MACD = EMAs(P) – EMAl(P).

The periods given are 12 and 26. The resulting line is then aligned with the third exponential moving average (EMAa), usually with a period of 9, resulting in the so-called MACD signal line (Signal).

Signal = EMAa(EMAs(P) – EMAl(P)).

These two resulting curves form a normal linear MACD. Also in the indicator window there is often marked the zero line, concerning which the curves fluctuate.

History

The MACD, or moving average convergence/divergence indicator, is one of the most well-known and popular classics of technical analysis. Gerald Appel, prominent New York trading expert, developed it in 1979 in order to analyse the stock markets, and it has subsequently spread to other markets such as futures and currency markets. Gerald Appel is known as an author of many books such as “Winning Marker System: 83 Ways to Beat the Market”, “Stock Market Trading Systems” “New Directions in Technical Analysis” and others, as well as his own newsletter “Systems and Forecasts”.

However, despite everything, the MACD, as well as many TA indicators, is not completely accurate and is capable of giving many erroneous and false signals. Especially with volatile assets, poor tendencies or flat price movements. For this reason, most traders resort to applying the MACD along with other indicators, for example RSI, to reduce risk and later confirm signals.

Short Video ex: The Best Times to Use the MACD Indicator

Conclusions

Stochastic Oscillator

Stochastic Oscillator

3 min reading

This article reveals another indicator that will blow your mind. Trading simplified!

Stochastic Oscillator

Stochastic Oscillator

The rise of cryptocurrency has seen the introduction of different technical analysis methods and indicators implemented by traders to determine price fluctuations and the relationship between opening and closing prices. Some of these indicators include Moving Averages, Relative Strength Index, Ichimoku Cloud, etc. In this article, we will elaborate on the stochastic oscillator that is used by traders in stock markets, Forex, and cryptocurrency markets. We will also give relevant information on how you can use this indicator to trade on the bit4you. 

What is a stochastic oscillator?

This is an indicator that compares a particular closing price to the prices of the asset over a period of time. George Lane developed this indicator in the 1950s. The term stochastic refers to the point of a current price in relation to the price range over a period. Traders can predict price turning points by comparing the closing price of a security to its price range. To better understand, the general theory of the stochastic oscillator is that a stock’s closing price gets closer to the recent highs on the chart if the trend is moving upwards and closer to the lows if it moves on a downtrend. 

Formula for stochastic oscillator

% K = (C-L14/H14-L14) x 100

Where 

C =  the most recent closing price

L14 = the lowest price traded of the 14 previous traded sessions.

H14 = the highest price traded during the 14-day period

% K = the current value of the stochastic indicator

Basically, stochastic comprise two values: %K (percent-K) and %D (percent-D), with %K providing the indicator while the latter is a moving average of the %K indicator. Understand that these indicators range from 0 to 100. The area above 80 represents overbought conditions, while the area below 20 shows oversold conditions. There is trend reversal when% K line and% D line cross an overbought or oversold region. In other words, the buy signal occurs when the %K line crosses %D line from below the oversold region while a signal occurs when %K line crosses %D from above in the overbought territory. 

How to use Stochastic Oscillator on bit4you

Assuming that the user already has a crypto account and wallet and has been trading on the crypto space, this is how they go about using a stochastic oscillator on bit4you. Every trader should understand that stochastic uses a standard period of over 14 days. These days can be adjusted based on the analytical needs. To calculate a stochastic oscillator, subtract the low for the period from the currency closing price, divide the total range for the period and then multiply by 100.let us consider that the 14-day high is $100, the low is $75 and the current close is about 150. The calculation will be (150 – 75)/100 – 75) * 100

Here is a summary of the stochastic oscillator indicator.  With this indicator, two relationships are peculiar. The relationship between the high-low range over a given number of days  and the relationship of the low over the same number of days. The stochastic oscillator occurs when the trader uses the low. The stochastic oscillator occurs when the trader uses the low. Using the stochastic oscillator in a highly trending market could not be the best option because if there is a longer period of trendedness, the trader could panic or get impatient. Notwithstanding, it is good to apply other indicators when trading.

Conclusions

Golden cross & Death cross

Golden cross & Death cross

5 min reading

The golden cross and the death cross, using moving average strategies on bit4you, all explained in this article.

Golden cross & Death cross

Golden cross & Death cross

When it comes to technical analysis, chart patterns are plentiful.Nevertheless, there are many other patterns that are useful for day traders, swing traders and long-term investors. These are the golden cross and the death cross. Let’s break them down in more detail.

What is a golden cross? 

A golden cross appears when the short-term moving average is above the long-term moving average from below to above, signalling a possible strong movement of the asset price upwards. There are two important  formation aspects of the golden cross. Firstly, due to the depletion of the sellers’ strength, the downward strong trend must come off, resulting in less market pressure from sellers. The second integral component is that the short-term MA must rise above the longer-term MA, usually the 50-period MA and the 100-period MA are involved. The Golden Cross is best analysed against the dynamics and signals of the monthly, weekly and daily graphics.

What is a death cross?

There is also the reverse phenomenon: a death cross is formed upon long-term depletion in buying strength with the short-term asset moving average dropping below a long-term moving average, usually a 50-period and a 200-period MA. As a golden cross, the death cross is best sought on the higher time frames, since the trend should be confirmed over time and not dependent on short-term intraday dynamics. It should be noted that death cross and gold cross signals may not always be ideal, but detecting such crosses along with analyzing other indicators is an invaluable opportunity to navigate the market chaos of the most volatile asset class in the world.

The difference between them

In this article we have looked at both, so making sense of the differences will be easy. Actually they are the exact opposite in relation to each other. The golden cross refers to bullish signals, while the death cross refers to bearish signals. The validity of each of them will confirm a significant level of trading. However, some experts apply additional technical indicators to prove the correctness of the market trend change. Frequent means of additional analysis are indicators of convergence/divergence between moving averages and Relative Strength Index. Besides, it is essential to be aware that moving averages belong to the category of lagging indicators, and they cannot predict the situation in the future. Consequently, both crossovers are usually strong evidence of a trend change which has already occurred, rather than one in waiting.

How to use them on bit4you?

To figure this out and understand how this works, use the bit4you platformFirstly, you need to click on the desired asset and the price chart for the specific timeframe will appear. The Golden Cross can appear on a weekly timeframe, and the Death Cross on an hourly timeframe. For this reason, it is advisable to constantly zoom in and observe the whole situation on the chart, taking into account various parameters. When trading the Golden Cross and the Death Cross, you should also note the volume of trading. Volume, like other chart patterns, is a reliable source of confirmation. For example, if the crossover signal goes hand in hand with a spike in volume, you will be more certain that the signal is current. When a “Golden Cross” occurs, the longer-term moving average becomes an area of potential support. On the other hand, when a “Death Cross” occurs, you could see it as a potential resistance point. However, you can also cross signals from other technical indicators to look for convergence. Combine several signals and indicators in one trading strategy to increase the reliability of trading signals.

On the bit4you platform, you can also use about five different moving average strategies. Crossing moving averages is one of the most popular trading strategies. When there is a crossover of shorter moving averages, you can use a crossover from 5 to 13 EMAs for example, or choose other combinations of numbers like the 21 and 50 EMAs. You might consider placing a new buy order to move in line with the long-term trend. You can also use moving averages during pullbacks. As we have already suggested, during an uptrend, you may notice the EMA 5 and 13 lines crossing several times in the opposite direction. If the EMA 5 and 13 do not fall below previous lows, this signals a correction rather than a complete trend reversal. This is called divergence. In addition, you can use moving averages to control the trend. In this case trend lines are great for predicting potential resistance and support levels. It is worth remembering that the slope of a trendline can vary. Be vigilant, if the slope angle is high, you will exit the trade quickly. On the other hand, you might also allow yourself to lose the bulk of your profits. It is also possible to use a moving average to set a stop loss and exit a trade on our platform. You can use moving averages as a way to enter a trade and continue trending as well as to exit. If you wait for the moving average to cross in the opposite direction, in order to exit, it can fail. However, if you simply put a stop loss above the moving average, you can exit the trade quickly and easily. The final strategy is using the moving average to lock in profits. Using support and resistance to lock in profits makes a lot of sense. For example, if during a trend you see price approach a strong support or resistance, then you can always scale horizontally and take profits. 

Formula

EMA = Pc * K + EMAv * (1 – K), where

K = 2/n – 1,

n is the averaging period,

Rs is the price today,

EMAv – yesterday’s EMA value.

However, be cautious about trading the Golden Cross in periods of consolidation, as the market can deceive you. Try to employ the Golden Cross as a tendency filter. Open a trade on a lower time frame in the direction of the main trend when an extra signal occurs. This way you will be able to get in on the deal at a more favourable rate and with as minimal risk as possible. You can leave the trade upon the appearance of a contrary signal, the Cross of Death, appears. The ” Death Cross” strategy has identical goals. Have a profitable trade!

Conclusions

Elliot Waves

Elliot Waves

4 min reading

One of the popular tools of technical analysis is Elliot Waves. Let’s dive deep into this topic together.

Elliot Waves

Elliot Waves

Brief History

After much research, it became known that the market moves in waves. For many decades, traders have been feeding on finding special market patterns that could predict the development of wave structure. Various forecasting systems have been created, and the most popular is “Elliot Waves“, named after Ralph Nelson Elliott, who was a professional accountant. In 1938 his book “The Wave Principle” was published, where the principle of robots of the theory of waves is described in more detail.

Wave development types

There are two styles of wave development: motive and corrective. Waves motive style (or motive waves *) have a five-wave structure, while corrective style (or corrective waves *) have a three-wave structure or their varieties. The driving style is the basis of both the five-wave structure and its unidirectional components, i.e. waves 1, 3, and 5. Their structures are called “driving” because they set the market in significant motion. Corrective style is at the core all pullbacks in the opposite direction that include waves 2 and 4. Their structure is called “corrective” because they can only perform partial retracement or “correction” from a move reached by any previous motive wave. So,  these two styles are fundamentally different both in their role and in their structure.

In the current interpretation of Elliott’s theory, his followers place greater emphasis on the correspondence of this theory to the psychological characteristics of human behavior. In currency and stock trading, wave theory can be used as a basis or additional tool in the structure of a trading strategy.  Most of the trading tactics using fractal principles, on which the Elliott waves are based, have excellent trade profitability indicators.

In some cases, a trader can use these Elliott waves as a prediction of the end of a trend in order to prepare for the formation of a new trend and optimize deposit management. In other situations, wave analysis is used to recognize an already formed trend and is used to confirm the forecast and a more rational market entry.

How to use it on bit4you

Elliott came to the conclusion that market movements are caused by investors’ reactions to various macroeconomic stimuli, and that upward and downward movements repeat themselves regardless of the stimulus. He also mentioned that the movement phase can be divided into several stages, or “waves.” These waves can be seen in the graph. The essence of this indicator is that it displays price movement phases (waves) as directed intervals. As a result, each wave can be classified as either an impulse (forward movement) or a correction (pullback). This and other technical analysis methods are available on the trading platform bit4you. Also, the waves can be used to determine the current state of the market at the time of the forecast. Despite the seeming simplicity of the basic principles, wave theory is one of the most difficult sections of technical analysis.

The Elliott Wave Theory is a rather complex type of analysis that takes time and perseverance before putting it into practice. Many traders use the provisions of the Wave Theory in combination with other technical analysis tools, thereby increasing the effectiveness of their forecasts.

Conclusions

What are trend lines?

What are trend lines?

4 min reading

It’s that time to understand all things considering trend lines. Read this article to improve your cryptography skills.

Trend lines

What are trend lines?

What are Trendlines?

Considering that you have all the information you need about cryptocurrencies and are ready to trade and follow the chart for higher rates. According to the Cambridge Dictionary, a trendline can be defined as the direction in which a situation is moving, specifically as shown by a line on a chart. But what are the trend lines in the financial markets? These are diagonal lines drawn on graphs that link specific data points, which makes it easier for charts and traders to view price movements and identify market trends. 

Trendlines are regarded as one of the main tools of technical analysis and are used on the stock exchange, fiat currencies, financial derivatives, and even cryptocurrencies. They are made up of diagonals, not horizontal lines, and serve as support and resistance levels.

Types of Trendlines

Trendlines can be divided into two categories: up and down. An uptrend is plotted from a low position to a high position on the chart and connects two low points, while a downtrend is drawn from a high position to a low position on the chart and connects two highs and gives the investor an idea of where the investment is headed.

These points mark either consecutive highs or successive lows on a price chart. With an upward sloping, the line is drawn using the highest points on a chart while with the downward trend, the lines are drawn based on the lowest points on the chart. These points are drawn within a time frame which could either be one minute or ten minutes interval. 

What is support level?

As we previously mentioned, trendlines are used to identify support and resistance levels, two important concepts in technical analysis. What is the level of support and resilience on a trend line? A support level is a level that tends to hold the price down, preventing it from falling. At the level of support, prices can decline only under strong pressure from sellers. Traders and charting specialists usually draw support lines based on previous lows. 

When a support level is broken, it becomes a resistance level. It is always recommended to consider two low points when drawing support lines.On the other hand, a resistance level is the exact opposite of a support level.

This is a level that the price of an asset cannot cross due to strong selling pressure. Due to the large supply of sellers in the price area, the resistance level tends to act as a limitation. Technical analysts draw resistance lines based on previous highs, which is a useful technique, especially when it comes to predicting potential price reversal points. When the resistance level is broken, it becomes a support level. Also, as in the case of support lines, it is always recommended to take into account at least two high points when building resistance lines. The more glasses you use, the more reliable they will be.

How to use trend lines

On our bit4you platform you can explore charts like the one above, where there are high and low points, and not all trends have the same weighting. The more often a trend line is tested, the stronger it is considered. Likewise, if it is drawn over a longer period, it is considered more solid. When the trendline is broken, it means that the trend is broken and can be reversed. When this happens, traders use it as a trading signal to trade against the trend. It is always recommended to wait for a signal before trading against the trend as this can be a trap. Note that an uptrend line indicates support levels below which the price is unlikely to fall, while a downtrend line indicates a resistance level above which price is likely to rise.

Formulas

Next, we describe the equations used by Excel to determine the trend lines of several categories.

In a linear trendline equation, the least squares method looks for slope and intercept coefficients such that:

y = bx + a

For an exponential trendline, Excel uses equations of the following form:

y = aebx

Below is the equation for a logarithmic trend line in Excel:

y = a*ln(x)+b

You can use the following equation to construct a polynomial trend line in Excel:

y = b6x6 + … + b2x2 + b1x + a

The power trendline in Excel is based on a simple equation

y = axb

Conclusions

Investment Strategies (Categories)

Investment Strategies

4 min reading

If you have just joined the crypto-currency market and you don't know how to invest, in this article we describe the Investment Strategies.

investment strategies

Investment Strategies (Categories)

Just like every traditional business needs a business strategy, crypto-currencies also require you to establish a strategy before investing. There are always things to look out for when investing, as well as things to implement. If you have just joined the crypto-currency market and you don’t know how to invest, then, you really don’t have to worry because this article will enlighten you on what and how to invest.  It is important to note that crypto assets are high-risk investments that if you do not adopt a proper strategy, you can lose a lot.

What strategies exist

In traditional business, when conducting a study regarding a particular company, most people apply the SWOT method which stands for strength, weakness, opportunities, and threats. When it comes to crypto-currencies, there are strategies such as HODL, Dollar Cost averaging (DCA), Golden cross/ Death cross, scalping, swing trading, and RSI divergence, and many more. However, there is no one right strategy in crypto-currencies, as a strategy may work for A, but fail for B. Therefore, it varies from person to person and depending on the time frame in which they want to invest. Every crypto-currency trader will therefore need to master what works for them and stick to it. 

The HODL strategy

The HODL strategy, for years now, has proven to be one of the most successful strategies in crypto-currencies. It simply means that you invest and hold your assets. For those who don’t have the time to stay glued to their computer, watching for price fluctuations, then HODL is the best strategy for you to adhere to. Buying low, HODL, and selling high when crypto-currency prices rise continues to be the strategy of choice for many cryptocurrency investors. What most traders do is buy more altcoins to build a hodl portfolio. For example, Stephen owns bitcoins and in order to build a hodl wallet, he buys other coins like Litcoin, Polkadot, and many others that he will later convert into bitcoins because he knows that, based on his speculations, other institutions will need bitcoins that he will eventually sell to them. But as we mentioned, crypto-currencies are volatile, you can hold a large number of coins and in the end, lose or vice versa.

Dollar-Cost Averaging (DCA)

Dollar-Cost Averaging (DCA), is another strategy that works especially for those who have the income to invest only at the end of the month. With this type of investment strategy, investors periodically allocate a certain amount of capital to build a position over time. The same dollar amounts at the same regular intervals. This simply means that instead of investing a large sum of money at once, the investor may decide to do so in small amounts at particular times of the day. 

For example, Joe has $10,000 and would like to invest $500 in bitcoins at noon every two weeks. So that means that in ten weeks, Joe would have bought $500 worth of bitcoins. This works for him because he will not lose outright, when there is a downtrend he will buy more and when there is an uptrend he will buy less. This will help him not to get too emotional about the investment as a whole. Also, there is no such thing as a time-out with the DCA because all the investable money is invested at all times. 

How to use it on bit4you

To get the best understanding of the strategies we listed above, we recommend you first test them on bit4you Demo mode. There you will have the same trading opportunities compared to Real more, except withdrawing funds. Once you registered your Demo account, you will get $100 000 of virtual funds. Therefore, you will be able to buy, sell, trade, and exchange with more than 25 crypto assets, use all available technical indicators and graphs. All this together is a great opportunity to expand your horizons and become more advanced in crypto. Besides, you can always test one more strategy or crypto coin and just have fun!

However, as we mentioned earlier, these are not the only investment strategies available. But we can say that they are the two most successful strategies so far. Other strategies like the Golden cross/death cross, scalping, swing trading, and RSI divergence can work, but these strategies are not the best for beginners. To be safe, it is advisable to start with the two strategies mentioned above. 

Conclusions

The Fibonacci sequence

The Fibonacci sequence

5 min reading

Another well-known tool of technical analysis is the Fibonacci sequence. Keep reading to know everything about it.

Fibonacci

The Fibonacci sequence

Introduction 

The rise of cryptocurrency has seen the introduction of different technical analysis methods implemented by traders to determine or speculate on the price fluctuations. These speculations may be market analysis frameworks like the Elliott Wave Theory or the Dow theory. Apart from these theories, there are indicators that traders use as tools to know when to buy, sell or hold their digital currencies. Some of these indicators include Moving Averages, Relative Strength Index, Ichimoku Cloud, etc. In this article, we will elaborate on the Fibonacci sequence that is used by traders in stock markets, Forex, and cryptocurrency markets. We will also give relevant information on how you can use this indicator to trade on the bit4you. 

What is it?

This can be described in its simplest forms as a tool used by traders to predict their interests on charts. They derive the Fibonacci sequence from a string of numbers and they plot them horizontally on the chart. This sequence is not obtained by guesswork.   it starts with a 0 then 1 and later you add two preceding numbers to get the next sequence. For instance, 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, and so on, till infinity. 

History of Fibonacci

This sequence was invented by Leonardo Pisano Bigollo, Italian born of an Italian business person and grew up in a trading company in North Africa. Most Italians in the middle were business tycoons and merchants and therefore needed to master arithmetic in order to keep track of their transactions. However, at that time they used Roman numerals that seemed very difficult to understand, let alone make calculations. While growing up Fibonacci learned the Hindu-Arabic system of calculating, after which he published a book called Liber Abaci which proved the Hindu-Arabic arithmetic system superior to the Roman numeral system. You should wonder how the Fibonacci sequence came about. There was a mathematical problem about annual rabbit breeding and multiplication. So they considered that if a rabbit, male and female, gives birth to a new pair of rabbits, the new pair will bring forth another pair after a month of their birth because rabbits only give birth after one month of their birth.  And so every month they have at least a pair added to their number. Hence, the Fibonacci sequence. 

Formula

Calculating the Fibonacci sequence is not as complicated as it may appear. Remember that we mentioned it involves adding up the last two preceding numbers to get a new sequence. For example, we have a sequence of 0, 1, 1, 2, 3, 5. To get the next sequence, we will add 5+3 = 8 and trading. In trading, they derive these numbers from a mathematical calculation between these sequences. Notice that the Fibonacci sequence only comes alive after you calculate the ratio between adjacent numbers in the sequence. Let us take, for example, 34 divided by 55 equals 0.6181 and as you keep dividing and extending to the right, the numbers move closer. This 0.6181, when converted to a percentage, gives 61.8 percent, which is one of the Fibonacci retracement levels. 

How to use it on Bit4you

To apply the Fibonacci indicator on bit4you, you only need four simple steps. Find a completed trend, whether an uptrend or a downtrend. Draw the Fibonacci retracement lines in the direction of the completed trend. This means for an uptrend, it will be drawn from left to right,  and right to left for a downtrend movement. Wait for the price to reverse near the four key levels. When this happens, the trader can enter the trade toward the original trend. Some traders may prefer to enter the position at the retracement level, while others prefer to wait for the price to react and break before they trade. 

In a nutshell, Fibonacci is a popular tool that traders can use to draw their lines, identify resistance levels, stop loss, and even set some target prices. To create a Fibonacci replacement, the trader will have to take two extreme points on a stock chart and divide the distance by the key Fibonacci ratios of 38.2%, 50%, 61.8%, 0.78%, and 100%. Notwithstanding, Fibonacci is not void of setbacks, as it also faces the same drawbacks as other universal trading tools. That is why they are best used in tandem with other indicators. 

Conclusions

How to use volumes?

How to use volumes?

6 min reading

Does this refer to a sound or an increase in a trendline? Grab this opportunity to discover in this article what it is all about.

How to use volumes

How to use volumes?

While making predictions about the price movement, analysts use a huge number of tools. One of them is the Volume indicator (volumes) is a technical analysis tool that helps to track the activity of investors. Its calculations use the number of transactions (buying and selling) for a certain period of time. The principle of any market comes down to the supply and demand ratio. These indicators are key and directly affect the value of a crypto asset.

What are cryptocurrency volumes?

The volume of a cryptocurrency is simply the number of coins traded in the last 24 hours. It is the amount of value of a coin that has been bought and sold during the day. Trading has to do with indices and no one can really predict the exact time that is best to buy or invest coins. However, just like trend lines, the volume also helps give traders clues on how to buy, sell or invest in the cryptocurrency market. Keep in mind that volume varies with each crypto-currency. Each volume bar represents the number of coins traded during that period. On the volume chart, there are green and red bars. The common misconception is that most people think that the red bar indicates a buy while the green bar indicates a sell. However, the colors are a reflection of the closing direction of the price.

Understanding how to read the volume profile of a trending asset can actually help the crypto trader identify possible reversal orders. If you study a chart carefully, you will notice that volumes are higher during periods of downward movement. The period of low volumes suggests that bulls are reluctant to buy during this time; there could also be a period where the bears run out even if there is a slight price increase.

Note that traders tend to use the volume indicator to try to understand the strength of a given movement. If a price movement is accompanied by high trading volume, it can be said that the price movement has more validity, but if the opposite is true, it may indicate a weakness in the underlying trend. 

There are high and low-volume exchanges. With high-volume exchanges, when you sell an asset, there are always buyers for it. The same is true for crypto-currencies. You can set a high price for your coins, then wait a while, and the sell order will be filled due to the low volume. The higher the volume, the higher the number of buyers, as it allows the sell order to be satisfied by the buyer’s offer and be executed faster. High volumes allow for interconversion between different crypto-currencies. While a low-volume exchange creates arbitrage opportunities, before fully committing, every trader will want to make sure they can easily transfer or withdraw their investments. Crypto-currency arbitrage can be a profitable venture if you’re looking for the right exchanges where you can buy tokens and coins at bargain prices. 

There are three types of volume spikes: 

    • A volume spike indicates an overbought or oversold point, which is usually accompanied by a long price tail.
    • A volume spike indicates a strong continuation volume and this usually occurs after a reversal in the direction of the forming trend.
    • A volume spike indicates that a breakout is occurring. In this situation, the price is breaking out of a consolidation zone on strong momentum and volume.

How to use it on bit4you

In conclusion, when trading, it is always advisable to look for confluent signals from the volume indicator to support the price movement trend. You can try it on bit4you trading platform. There are many tools for convenient cryptocurrency trading. Also, note that a volume bar reflects all the stocks that were traded during the corresponding candle. If you notice several high-volume candles that do not support a particular trend, it may be a sign of an impending reversal.

In general, the ability to work with horizontal and vertical analysis is more than enough for the beginning. You should not be dispersed and try to cover all existing instruments at once. What is important in trading is a measured, systematic approach. Only forming a competent trading strategy and following it precisely will lead to great results. The volume indicator is one of the most important tools of the analysis, allowing you to track the activity of investors in a particular cryptocurrency.

Conclusions