Indicators are needed to predict how the market moves up and down as its movement is hard to determine. Bitcoin indicators are great tools that can provide a solid basis for traders to attain profits when traded correctly. However, despite being vital, these tools cannot provide a perfect price action as it can be difficult to stop when price gains more momentum in a direction. Indicators alert traders when to buy or sell from a given chart as a backup to boost their confidence.
A common indicator is the Relative Strength Index which helps traders to know when the price of Bitcoin is oversold or overbought. With a specific formula to calculate the RSI, a value below 30 is viewed as oversold and overbought when it is above 70. When the price goes beyond 70, traders can be assured of a pullback and take profits while waiting for a potential sell action. Similarly, when price action is at the oversold, buyers are about to gain control after a bearish market.
Bollinger Bands do not directly show when the market is oversold or overbought but indicates the level of volatility using three bands or lines. The two exterior bands react to price action by moving away from the middle bands when volatility is up and moves closer if volatility is down. It is moving averages to set the bands which can be adjusted on different patterns depending on the trader.
Moving Average is seen as a support or resistance indicator which are of two types. It provides a simple way of trading as the indicator which shows when price is moving upward or downward owing to its sloping direction. Buying signals are given when the MA is sloping upward but selling signals of sloping downwards. As a lagging indicator, it requires the use of many moving averages to avoid getting caught by false signals.