8 Major Best Trading Indicators

In the 24/7 operating market of Crypto Assets, high Fluctuation provides traders with more trading opportunities. Compared to trend markets, traders try to profit from short-term price Fluctuation rather than holding assets for the long term. As one of the most common trading strategies, Fluctuation trading requires traders to have the ability of quick market analysis, decisive decision-making, and strict Risk Management.

As a Newbie trader, it is best practice to combine multiple indicators and integrate Technical Analysis and Fundamental Analysis, while knowing how to use Fluctuation to participate in the market. This will help improve the accuracy of trading decisions through comprehensive learning and trial-and-error trading. This article will introduce Fluctuation trading strategies and 8 top trading indicators for reference.

What is Fluctuation trading?

Fluctuation trading refers to the buying and selling operations conducted by traders when there is a significant fluctuation in the market price, with the aim of making profits by capturing short-term price fluctuations. The faster the price changes, the greater the fluctuation. Conversely, the slower the price changes, the lower the fluctuation.

Fluctuation traders typically do not hold assets for long periods, but rather enter and exit the market frequently. Fluctuation traders buy assets at low points of Fluctuation and sell at the next high point of Fluctuation to take advantage of price Fluctuation. Fluctuation trading can be day trading, swing trading, or part of other short-term strategies.

Characteristics of Fluctuation Trading

Compared to trend trading, Fluctuation trading has a higher frequency of operations

Traders may make multiple trades within a short period of time, ranging from a few days, hours, or even minutes. Especially in the highly volatile cryptocurrency industry, altcoins have significant fluctuations, and traders hold their assets for short and fast periods of time.

Technical Analysis oriented

Fluctuation trading often relies on Technical Analysis indicators, such as: Relative Strength Index (RSI), Moving Averages, Bollinger Bands, etc., to help traders better identify short-term opportunities in the market.

Risk Management is crucial

Due to the significant Fluctuation in market prices, potential returns and risks are both high. Fluctuation traders need to implement strict Risk Management strategies, including setting stop-loss and take-profit levels.

Based on the above characteristics, Fluctuation traders are able to quickly profit in a short period of time, and there are opportunities for profit regardless of whether the market is in a Bull Market, Bear Market, or Sideways oscillation. However, Fluctuation trading also comes with high risks and psychological pressure. It usually requires traders to constantly follow market changes and make quick decisions based on market trends. If the market fluctuates significantly beyond expectations, failure to stop loss or take profit in a timely manner may result in rapid loss of profits or even losses. This is especially true in encryption trading, where trading platforms offer leverage and Contract Trading services, which amplify both profits and risks.

Therefore, traders need to choose a Fluctuation trading strategy that suits their own Risk Management risk tolerance and trading style, and combine multiple effective Fluctuation trading indicators and Risk Management measures to increase the success rate.

8 Best Fluctuation Trading Indicators

By familiarizing with multiple Fluctuation trading indicators, traders can better grasp market trends and make quick decisions in rapidly changing markets.

These indicators provide different perspectives on market information, including trends, trading volume, momentum, etc., which can provide a more intuitive and comprehensive deduction of short-term price changes, helping traders determine entry and exit points, while also helping to identify market sentiment and potential turning points, controlling risk by setting stop loss and take profit points.

The Fluctuation trading indicators can generally be divided into the following categories:

Trend Indicator

Trend indicators are used to identify the primary trend direction of the market and help traders determine the pump or downward trend of prices. Common indicators include: MA (Moving Average), MACD.

Momentum Indicator

The momentum indicator is used to measure the speed and strength of price changes, helping traders determine the market's Overbought or Oversold status, as well as potential reversal points. Common indicators include: Relative Strength Index (RSI), Williams %R, and Stochastic Oscillator.

Trading Volume Indicator

The Trading Volume indicator is used to analyze the changes in market volume, helping to confirm the strength or possibility of a trend reversal. Traders can assess the effectiveness of price fluctuations. Common indicators include Trading Volume (Volume) and On-Balance Volume (OBV).

Volatility indicator

The Volatility indicator is used to measure the volatility of market prices and helps traders identify whether the market is in a calm or active state. Common indicators include Bollinger Bands and Average True Range (ATR).

Mixed Index

The composite indicator combines various types of analysis methods to provide multidimensional market analysis. For example, the Parabolic SAR combines trend tracking and momentum analysis to provide market reversal signals.

Below are the top 8 best Fluctuation trading indicators.

1. Relative Strength Index (RSI)

RSI is typically used to measure the Overbought or Oversold status of an asset, with values ranging from 0 to 100.

RSI > 70 is usually considered as Overbought, which may indicate an imminent pullback.
RSI < 30 is usually considered as Oversold, which may indicate that a Rebound is imminent.

It should be noted that RSI is not an absolute indicator. In a strong trend, RSI may remain at high or low levels for a long time.

(source: gate)

As shown in the BTC daily candlestick chart, during late January to mid-March this year, BTC initiated a strong pump trend. Despite the BTC daily candlestick RSI briefly touching 80, there was little retracement during the pump, indicating strong momentum. It wasn't until mid-March, after the daily candlestick RSI remained close to the high level of 90 for a sustained period, that the trend finally reversed, leading to a oscillating decline.

2. MA (MA)

MA smoothes price data by calculating the average price over a certain period of time, helping traders identify and confirm market trends. The main types are:

Simple Moving Average (SMA): Calculate the simple arithmetic average of all prices within the specified period.

Index MA (EMA): giving higher weight to recent prices, reacting faster to market changes.

Weighted Moving Average (WMA): Calculate the average value based on custom weights.

When the price is above the MA, it is usually considered a rise trend.
When the price is below the MA, it is usually considered a downtrend.
When multiple MA lines converge, it may indicate that a significant Fluctuation is about to occur.

MA is often seen as a dynamic support or resistance level. When a crossover signal occurs, such as when the short-term MA crosses the long-term MA, it may indicate a trend change.

As shown in the chart below, after the 9-day EMA on the 4-hour chart of BTC crossed above the 26-day EMA, BTC entered a short-term pump trend. This crossover point is called a "golden cross," which is usually considered a buy signal. Conversely, the crossover point is called a "death cross," which is typically considered a sell signal.

(source: gate)

However, it is important to note that MA works better in trending markets. In a volatile market, MA may generate a large number of false signals. Therefore, traders should not rely solely on MA but should analyze comprehensively in combination with volume and other technical indicators.

3. Bollinger Bands

Bollinger Bands were created by John Bollinger in the 1980s to measure market volatility and potential price ranges.

Composition of Bollinger Bands:

Midline: Typically a 20-period Simple Moving Average (SMA).

Upper band: The middle band plus two standard deviations.

Lower band: subtract two standard deviations from the middle band.

The Bollinger Bands is a Fluctuation indicator, and the widening of the band indicates an increase in Fluctuation, while the narrowing of the band indicates a decrease in Fluctuation. When the Bollinger Bands are extremely narrow, it usually indicates that a significant Fluctuation is imminent.

In the Fluctuation market, the Bollinger Bands can be seen as an 'Oversold' signal.

Prices approaching or breaking above the upper band may indicate Overbought.
Prices approaching or breaking below the lower rail may indicate Oversold.

It is important to note that the Bollinger Bands perform differently in trending markets and ranging markets. In a trending market, asset prices may stay above or below the Bollinger Bands for a long time, so it should not be simply viewed as a "sell or buy" signal at this time.

As shown in the figure below, BTC 4-hour chart, its PA has been fluctuating between the lower and upper bands.

(source: gate)

4. MA Convergence Divergence (MACD)

MACD consists of two lines: the MACD line (fast line) and the signal line (slow line). Their cross and relationship with the zero line can provide trading signals.

MACD line crosses above signal line: may be a buy signal
MACD line crosses below the signal line: may be a sell signal
MACD histogram transitions from negative to positive: may indicate a rise in momentum
Divergence between MACD and price may indicate a trend reversal.

For example, as shown in the red box in the daily chart of BTC, when the MACD line crosses the signal line and the MACD histogram turns into a positive value, the pump momentum of BTC is enhanced, and the pump continues.

(source: gate)

5. Trading Volume （Volume）

Although Trading Volume is not a complex technical indicator, it is extremely important in verifying the strength of PA.

Price pump accompanied by an increase in volume: usually considered a strong rising trend
Price decline accompanied by an increase in volume: may indicate strong selling pressure
When the price changes but the volume is low: it may indicate a lack of trend sustainability
Sudden surge in volume: may indicate an important market turning point

Looking at the daily chart of BTC, there have been significant increases in volume, and subsequent BTC movements have all experienced intense Fluctuation.

(source: gate)

6. Stochastic Oscillator（Stochastic Oscillator）

The Stochastic Oscillator is a momentum indicator consisting of %K line and %D line, used to determine the position of the price within a certain period. Its operation is similar to the RSI indicator, but the calculation method is different.

%K line crosses above %D line: potential buy signal
Crossing of %K line below %D line: may be a sell signal
Indicator value exceeds 80: possibly Overbought
Indicator value below 20: possibly Oversold

(source: gate)

As shown in the above chart, in the BTC daily chart, when the Stochastic Oscillator is repeatedly below 20, BTC is also in a phase of bottoming out, indicating an oversold market and a demand for rebound. However, it is important to note that although the Stochastic Oscillator is a useful tool, it is not omnipotent. Traders should use it in conjunction with other technical analysis indicators and fundamentals to improve accuracy of judgment.

7. Fibonacci Retracement

The Fibonacci pullback is based on the Fibonacci sequence and is used to identify potential support and resistance levels. Common pullback levels include 23.6%, 38.2%, 50%, and 61.8%.

In the rise trend, these levels may become support levels for pullback.
In a downtrend, these levels may act as resistance levels for rebounding.

For example, in the recent big dump of BTC, the price fell from $70,018 to $49,116. According to the commonly used Fibonacci levels, BTC has repeatedly found support at the 38.2% level during subsequent rebounds, while the 61.8% level has become a resistance level for rebounds.

(Source: Tradingview)

8. Average True Range (ATR)

ATR is a Fluctuation indicator developed by J. Welles Wilder Jr. It measures the average price Fluctuation of an asset over a specific period of time, regardless of price direction, and can help traders set stop-loss levels and target prices.

High ATR value: indicates high volatility, which may indicate significant market turning points or breakthroughs
Low ATR value: indicates low volatility, may indicate consolidation or the end of a trend
Used to set stop loss: for example, stop loss can be set 2 times the ATR outside the get on board price

(source: gate)

For example, if the price of BTC is $58,500 at this time, the daily candlestick ATR is 2470, which means the daily average price Fluctuation of BTC is about $2470, so the stop-loss point can be set at a position 2 times ATR below the get on board price, which is about $53,560 ($58,500-2470*2).

Conclusion

In general, the Fluctuation trading indicator provides a strong foundation for Technical Analysis in Fluctuation trading, but their effective use requires a deep understanding of the market, continuous learning, and strict Risk Management. As a trader, it is best to use multiple indicators, validate signals, and customize parameters based on your own trading risk to continuously optimize your trading strategy. At the same time, traders should also combine fundamental analysis, market dynamics, etc., and flexibly adjust their trading logic.