How to use mathematical indicators to trade cryptocurrency

In Trading

Technical analysis may appear somewhat subjective. Fortunately, with recent advances in charting software, it is now possible to complement chart analysis with the study of mathematical indicators, enhancing the objectivity in technical analysis.

Mathematical indicators that help describe price strength, direction, volatility and support/resistance are generated through calculations involving price and/or volume history data. You will want to understand mathematical indicators if you are learning how to trade cryptocurrency.

The price and/or volume data may be taken from any combination of the open, high, low or close over a time period. Mathematical indicators should be analyzed over a period of time, in conjunction with charting patterns and with the price itself.

When displayed graphically, mathematical indicators can help confirm and predict price action. It is a good idea to have a general understanding for how an indicator is calculated, but more critical is being able to interpret an indicator’s trading signals.

Common mathematical indicators used for crypto trading

Examples of popular mathematical indicators include Simple Moving Average (SMA), Exponential Moving Average (EMA), Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), Bollinger Bands and Fibonacci Retracements.

There are dozens of other mathematical indicators available in most trading or charting software packages, but a point of diminishing returns is reached once an optimal number of mathematical indicators have been applied.

Additional mathematical indicators overcrowd the chart display and contribute to information overload leading to paralysis during instances when you need to be nimble in decision making.

Most mathematical indicators can be divided into either leading or lagging indicators. Leading indicators are also known as momentum indicators, as they describe the amount of momentum behind price trends.

Lagging indicators are also referred to as trend indicators, as they follow and confirm trends.

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Want to learn more about how to trade cryptocurrency? Read our articles on chart analysis, technical analysis and support/resistance.

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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.


Darren Chu, CFA

Darren Chu, CFA, is the founder of Tradable Patterns, publisher of daily technical analysis on Bloomberg, Thomson Reuters, Factset, Interactive Brokers, Inside Futures, and other partner websites. Before the launch of Tradable Patterns, Darren served as IntercontinentalExchange | NYSE Liffe's country manager for Australia, India, and the UAE, expanding his role to look after Liffe business development in APAC ex-Japan/Korea until his departure mid April 2014. Previously, Darren was with the TMX Group | Montreal Exchange, marketing Canadian futures and options across North America, London, Singapore and Hong Kong. Darren also launched and managed CMC Markets Canada's Chinese marketing and sales team, along with educational offering. Visit for more information.