How to find cryptocurrency trading signals

In Trading

If you’ve made a start with trading and you’re ready to take it to the next level, we’re here to help. Here’s our guide on how to uncover and use the most effective cryptocurrency trading signals, right now.

Volume

Trading volume is the most basic indicator available. It shows the amount of trading activity during a specific time frame, represented by bars on the chart.

Due to its simplicity, volume is often overlooked. What the pro traders don’t want you to know is that volume presents a lot more information than originally meets the eye. Volume provides some of the best cryptocurrency trading signals.

Here’s what you need to know about volume

The colour of the volume bar doesn’t represent buying or selling. It just follows the colour of the candle it represents. By default, if a candle closes above the open the candle and volume bar will be green. If a candle closes below the open then the candle and volume bar will be red.

As a trader you need to watch what the volume is telling you. The amount of volume in combination with price movement can show whether momentum is increasing or waning. Therefore, by watching volume you can identify possible reversal points.

  • If price is moving downwards, look for increasing volume to support the movement, coupled with decreased volume during the buyback phases.
  • If the price is trending upwards, look for decreasing volume during pullbacks with high volume supporting the upward trend.
  • If you see multiple high-volume candles that don’t support the current trend, it could be a sign of an impending reversal.

News

News, or changes in the macro-economy, are an important cryptocurrency trading signal. In fact, news and what’s happening in the world is important when investing in every single different asset type. The financial industry feeds on news.

Bad news can cause prices to drop and good news can cause incredible price hikes. As a crypto-trader you have to keep your finger on the pulse. If there is news to be seen, you’ll have to be on top of it. Bottom line - big news is a cryptocurrency trading signal, regardless of whether it’s positive or negative.

Indicators

Mathematical indicators can be used on the trading chart you’re using. They digest, analyze and churn out data in a readable form that is used by traders around the world to beat the markets and make money.

That’s right - indicators can provide cryptocurrency trading signals.

Some of the best ones available. Divergence is one of the most popular ways to use indicators.

Divergence

Divergence is the separation of two lines or paths.

While price moves one way, other indicators can move in the opposite direction. Professional traders are always on the lookout for divergence because it can give key trading signals to support market analysis.

 

Here are the four types of divergence to look for:

  1. Bullish Divergence - price prints a lower low, but a corresponding indicator prints a higher low.
  2. Hidden bullish divergence - price prints a higher low, while the indicator prints a lower low.
  3. Bearish divergence - price prints a higher high, but the corresponding indicator shows a lower high.
  4. Hidden bearish divergence - price shows a lower high, but the corresponding indicator shows a higher high.

Learn more about divergence


Support and resistance

Support and resistance is one of the more pedestrian technical analysis approaches but it will always hold some credence in the trading community.

Support is a price level where buying interest is sufficiently strong to overcome selling pressure, providing either price stability or upward movement. At a support level the price is ‘supported’ from falling further by buyers.

 

Resistance is the opposite of support. A resistance level represents an area where selling pressure overcomes buying pressure, stalling or preventing price advance.

When a strong support or resistance level is broken some traders take this as a strong cryptocurrency trading signal. Notice in the picture above how, when Bitcoin broke a key support level, price fell dramatically.

 

margin trade crypto

This content is not financial advice and should not form the basis of any financial investment decisions nor be seen as a recommendation to buy or sell any good or product. Trading cryptocurrency is complex and comes with a high risk of losing money, particularly if you trade on leverage. You should carefully consider whether trading cryptocurrencies is right for you and take the time to learn how trading works and decide how much money you are prepared to lose.

WRITTEN BY

Liquid

Providing liquidity for the crypto economy.