The Only Three Technical Indicators You Need to Trade Cryptocurrencies
Weeks ago, we highlighted three key technical indicators that pinpoint pivots 80% of the time.
And they just did it again.
All we have to is watch Bollinger Bands (2,20), relative strength (RSI), and Full Stochastics. We can even look at Williams’ %R and MACD, but let’s focus on our three key indicators.
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Bollinger Bands (2,20)
Set at two standard deviations above and below the 20-day moving average, the Bollinger Bands let us know how far we can pull our “bungee cord” before it snaps back.
After all, you can only stretch the cord so far before it snaps back.
The same thing happens with stocks and cryptocurrencies. They can only be stretched so far before they begin to pivot and revert to mean. In fact, look at what happens with Bitcoin (BTC) when it tests its upper Band. Up to 80% of the time, Bitcoin pulls back.
However, we never want to rely on a single indicator. So, we can also look at RSI.
Relative Strength (RSI)
When the upper Bollinger Band is hit, and RSI is testing a historical high, we typically see a reversal in the coin, as well. In fact, look at what happens when RSI is near its 70-line, and the coin is at its upper Band. Again, up to 80% of the time, there’s a reversal.
However, we don’t want to rely on just two indicators. So, we add in more for confirmation.
As you can see in the chart, there are a considerable number of ups and down on Full STO. With this indicator, when it gets to or above its 80-line, BTC is considered overbought. If BTC is at its upper Band, and RSI is over-extended at the same time, we see a pivot. The same holds true when Full STO has fallen to or below its 20-line.
Take a look at what it’s telling us now.
It’s beginning to drop from above its 80-line, confirming what RSI and the Bollinger Bands are telling us. Immediate-term, it appears BTC could pull back to $3,700 before bouncing again once each of the above-mentioned indicators align in oversold territory.
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