Market Indicators

Traditional & Popular Market Indicators

indicator
Too slow?
The following traditional market indicators are popular tools in almost any experienced trader’s strategy tool box.

A word of caution. While each indicator tells its story about the market of a digital asset, no indicator by itself tells the whole story of a market and should not be used exclusively in buy or sell decisions. Every indicator has its limits and is not fail prove. They won’t deliver magic, they can only tell you about probabilities.

It is smart to approach a digital coin market by first looking at the larger, macro, or “slow” picture (monthly or weekly charts, volume, moving averages, etc.) to see if it’s a go or not, then gradually zooming in to a more detailed view (daily charts, MACD, RSI, Bollinger Bands, etc.) for specific opportunities, and ending up in micro, or “fast” views (hourly charts, Stochastics, etc.) to determine actual entry and exit positions.

I recommend that you read these overviews of the most popular indicators here on COINBUCKET.ME and then, if still curious, move on to search for and watch YouTube videos to learn even more about them.

Market Capitalization

Right off the bat, though, the most powerful indicator of the market is the market itself. What is market capitalization? It’s calculated by multiplying the price by the circulating supply. Market capitalization is one way to rank the relative size of a cryptocurrency, or the entire asset class as in this case. Crypto market capitalization is aptly reflected by the Total Market Capitalization index published by the coinmarketcap.com site.


Total Crypto Market Capitalization as of April 8, 2018. Credit to coinmarketcap.com

Enter a crypto market when the market capitalization line is moving up (and before it’s sky-high) and exit when the line is moving down. Sincerely, and with a little good fortune, investing in or trading digital coins can be that simple!

Volume

Volume
Volume is the total amount of currency traded (and not the total count of digital coins or transactions), during a given period of time. In other words, it is the total amount of orders that are filled whether it is buy order or sell order, during a given period of time.

Moving Averages

Moving Averages
The Moving Averages indicator helps traders see or confirm the direction of a trend, and also provide basic support and resistance levels.

Moving Average Convergence/Divergence (MACD)

MACD
The MACD indicator and helps traders get a sense of when momentum is strengthening or weakening and determine when a trend has ended, begun, or may reverse direction.

Bollinger Bands

Bollinger Bands
The Bollinger Bands indicator helps traders to identify overbought and oversold conditions, and also is an indicator of volatility.

Relative Strength Index (RSI)

Relative Strength Index
The Relative Strength Index indicator helps traders identify overbought and oversold conditions, and shows the strength of a trend at any given point in time.

Stochastics

Stochastics
The Stochastics indicator helps traders identify overbought and oversold conditions, and shows the speed and change of price movements.

Elliot Wave

Elliot Waves
The Elliott Wave is a form of technical analysis that traders use to analyze financial market cycles and forecast market trends. Elliot Waves identify extremes in investor psychology, highs and lows in prices, and other collective factors.

Fibonacci Retracement

Fibonacci Retracements
Fibonacci Retracements are ratios used to forecast potential support and resistance levels leading to a reversal in trending. These ratios are found in the Fibonacci sequence and can be recognized throughout nature and biology, as well as in architecture and art.

Chart Pattern

Chart Pattern
Chart patterns are more than just random shapes which happen to form in the price movement of an asset. They form due to supply and demand dynamics and decisions traders take in certain situations.

Candlestick Formations

Candlestick Formations
Candlestick analysis looks at individual candles, pairs or at most triplets, to identify clues as to where the market is going. Insights are usually put into context with support & resistance levels.

Outside-the-Box Indicators

Some of these indicators seem to be unusual, if not mysterious. But all give important clues to understanding the market.

Sentiment Cycle

sentiment cycle
My loose adaptation of the popular Investor Sentiment Cycle from Justin Mamis’ book, The Nature of Risks. Click graphic to enlarge.
Using market cycles is not a precise timing tool, but they should not be ignored. Understanding how folks react to boom and busts throughout history can give valuable insights into crowd psychology.

The investor sentiment cycle is a popular one because it shows the various emotions that many investors experience as the market rises and falls. The graph is easy to comprehend and therefore sits well with newbies and beginners alike. Read a little more here.

Bitcoin Sentiment Index

Changes in social mood precede changes in the markets, in politics and more. Understanding this insight helps you anticipate major shifts in trends before most people see them coming.

The stock market has a sentiment indicator known by its ticker symbol VIX. This is a popular measure of the stock market’s expectation of volatility and published by the Chicago Board Options Exchange (CBOE). It is also referred to as the fear index or the fear gauge.

However, and not to be outdone, the crypto market has attracted enough attention by now that some companies have developed and maintain proprietary crypto sentiment indexes.

https://news.bitcoin.com/thomson-reuters-marketpsych-launch-bitcoin-sentiment-index/

https://news.bitcoin.com/the-bitcoin-misery-index-finding-an-entry-way-with-sadness/

As a leading indicator, a sentiment index is unique and has a spot in the awareness of long-term investors.

A Last Word For Now

Not the very last word, for sure. Please know that no one indicator is the silver bullet we all wish to find in trading. Any indicator needs to be put into a proper context, preferably with a few other indicators. No one indicator can tell the whole story of a market’s or digital currency’s tend, momentum or future price action.

Sure, experienced investors and traders have their favorite indicators to the point of “swearing” by them, and even tailor their trading strategies according to what info they believe they can glean from these indicators. However, for newbies and beginners it is perhaps best to start of with the most notorious indicators and get some experience first in regard to how they work or not. Then, there is always time to refine strategies.

And if trying to figure out how indicators actually work is too laborious, even just knowing a little about them really helps with understanding the jargon with which all technical analysts and commentators converse.