While Quadency allows you to trade on different exchanges using a single interface with advanced charts, being able to analyze those charts is an important part of informed decision making.
Technical analysis, or TA, is based on the assumption that the necessary information about a market is contained in past price movements. TA cannot predict the future but it can be used to assign probabilities to potential price movements and their amplitudes. In technical analysis, a number of different indicators are used to assess those probabilities. We'll review several of them in this ongoing TA series, starting with some of the most common:
- Trading Volume
- Relative Strength Index - RSI
- Moving Average - MA
Alongside price, trading volume is another important metric of market conditions. The volume shows the amount of the asset that has changed ownership hands within a given period of time. Most chart layouts show the volume by default, as shown by the histogram along the bottom of your Quadency charts.
Large price changes, such as the one on February 8th in the example below, are usually accompanied by higher trading volume. A steady decrease in trading volume can indicate the end of an up or down trend.
Relative Strength Index - RSI
The Relative Strength Index is one of the most widely used crypto indicators. It is an oscillator, meaning it moves in a bounded range. The RSI carries information about the speed and change of price movements and can have values between 0 and 100. There are generally 3 key ranges to consider in the RSI values.
- If the RSI value is below 30, the asset is called oversold and an upward price movement is usually expected. In bear markets, one can move the oversold area down to 20.
- If the value is above 70 the asset is considered to be overbought and a downward price correction is expected. In bull markets, one can move the overbought area up to 80.
- A midpoint value cross is when the RSI crosses the value of 50 after staying above or below that level for an extended period of time. This can indicate a potential trend reversal. The example below shows such a reversal with the RSI crossing the 50 levels around the 10th of February accompanied by a trend reversal.
Moving Average - MA
Another commonly used indicator used for crypto trading is the moving average. Moving averages can be calculated in a number of ways, with timespan being the key parameter. For example, to find the moving average for a 10-day period, you would take the average price of the last 10 days including today, and use the resulting value as today's 10-day MA value.
The bigger the timespan, the smoother the MA line will be. In the example below the 10-day moving average is shown in white and the 20-day moving average is shown in green. There are two main ways to use moving averages. One can look for the price crossing the MA (e.g. 3rd of January below) or for a cross in two MAs for different timespans (e.g. 10th of February).
Technical analysis is an important tool for informed decision making when trading digital assets. There are a number of indicators one can use to assign probabilities to potential price movements. In this article, we introduced you to three of the most commonly used indicators: volume, the relative strength index (RSI) and moving averages (MA).
Quadency's first-class TradingView integration allows you to apply a large number of indicators to create and save your advanced charts. So check out our follow-up article on more advanced indicators!