Cryptocurrency trading demands precision, insight, and a deep understanding of market behavior. One of the most powerful ways traders gain an edge is through technical indicators—mathematical calculations based on price, volume, or open interest. These tools are typically categorized into two groups: main chart indicators and sub-chart indicators, each serving distinct yet complementary roles in analyzing market trends and making informed decisions.
Understanding how these indicators work—and how to use them effectively—can significantly improve your trading strategy. This guide breaks down the most essential tools used in crypto trading, explains their functions, and shows how to interpret them within real-world market contexts.
What Are Main Chart Indicators?
Main chart indicators are plotted directly on the price chart. They help traders visualize trends, support/resistance levels, and potential reversal points by overlaying calculated values on top of price action.
1. MA (Moving Average)
- Purpose: Smooths out price data to identify trend direction over time.
- Common Periods: 5, 10, 20, 50, 100, and 200 periods.
- Insight: When price is above the MA, it suggests bullish momentum; below indicates bearish sentiment.
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2. EMA (Exponential Moving Average)
- Purpose: Similar to MA but places more weight on recent prices, making it more responsive.
- Best For: Short-term trading strategies where quick reactions matter.
- Common Settings: 12- and 26-period EMAs are widely used in day trading.
3. WMA (Weighted Moving Average)
- Purpose: Also emphasizes recent data but uses a linear weighting system.
- Use Case: Offers a balance between responsiveness and smoothing—ideal for swing traders.
4. BOLL (Bollinger Bands)
- Structure: Composed of a middle band (usually a 20-period SMA) and upper/lower bands set at ±2 standard deviations.
- Function: Measures volatility and potential overbought/oversold conditions.
- Signal: Price touching upper band may indicate overbought; lower band suggests oversold.
5. VWAP (Volume Weighted Average Price)
- Purpose: Reflects the average price weighted by volume—essentially the market’s “fair value” for the day.
- Usage: Traders compare current price to VWAP: above = bullish bias, below = bearish bias.
- Key Feature: Reset daily, making it ideal for intraday analysis.
6. AVL (Average Volume)
- Purpose: Displays average trading volume over a selected period.
- Why It Matters: Rising volume confirms trend strength; declining volume may warn of reversals.
7. TRIX (Triple Exponential Average)
- Mechanism: Applies triple EMA smoothing to filter out minor fluctuations.
- Signal Line Crossover: A TRIX line crossing above its signal line often signals bullish momentum.
8. SAR (Parabolic Stop and Reverse)
- Visual Format: Dots appear below or above price candles.
- Interpretation: Dots below price = uptrend (buy signal); above = downtrend (sell signal).
- Best Used In: Strong trending markets—less effective in sideways conditions.
What Are Sub-Chart Indicators?
Sub-chart indicators appear in a separate window below the main price chart. They don’t plot on price but instead analyze momentum, volume flow, and overbought/oversold conditions to provide deeper insights into market dynamics.
1. VOL (Volume)
- Basics: Shows total traded volume per time period.
- Trend Confirmation: Increasing volume during a breakout supports trend validity.
2. MACD (Moving Average Convergence Divergence)
Components:
- DIF (fast line): Difference between 12- and 26-period EMAs.
- DEA (signal line): 9-period EMA of DIF.
- Histogram: Visualizes the gap between DIF and DEA.
Signals:
- Bullish: DIF crosses above DEA.
- Bearish: DIF crosses below DEA.
3. RSI (Relative Strength Index)
- Range: 0–100.
Thresholds:
- Above 70 = overbought → potential pullback.
- Below 30 = oversold → possible rebound.
- Divergence Warning: Price makes new high but RSI doesn’t—signals weakening momentum.
4. MFI (Money Flow Index)
- Unique Trait: Combines price and volume to measure buying/selling pressure.
Levels:
80 = overbought.
- <20 = oversold.
- More Reliable Than RSI in detecting smart money movements due to volume integration.
5. KDJ (Stochastic Oscillator)
Lines:
- K: Fast stochastic line.
- D: Signal line of K.
- J: Represents divergence from equilibrium.
Signals:
- K > 80 = overbought; K < 20 = oversold.
- K crosses up through D = buy signal.
6. OBV (On-Balance Volume)
- Logic: Adds volume on up days, subtracts on down days.
- Trend Insight: Rising OBV confirms bullish trend; falling OBV warns of bearish pressure—even if price hasn't moved yet.
7. CCI (Commodity Channel Index)
- Measures: Deviation of price from its statistical average.
Levels:
100 = overbought.
- <-100 = oversold.
- Useful For: Spotting early reversals in cyclical assets like cryptocurrencies.
8. StochRSI
- Concept: Applies stochastic formula to RSI values for greater sensitivity.
- Range: 0–1 (often scaled to 0–100).
Triggers:
0.8 = overbought.
- <0.2 = oversold.
9. WR (Williams %R)
- Range: –100 to 0.
Readings:
–20 = overbought.
- <–80 = oversold.
- Similar To: Stochastic but inverted and shifted downward.
10. DMI (Directional Movement Index)
Parts:
- +DI: Positive directional movement.
- –DI: Negative directional movement.
- ADX: Measures trend strength (not direction).
Guidelines:
- +DI > –DI = uptrend.
- ADX > 25 = strong trend.
11. MTM (Momentum Indicator)
- Calculation: Current price minus price n periods ago.
Interpretation:
- Positive values = upward momentum.
- Negative values = downward pressure.
12. EMV (Ease of Movement)
- Idea: Measures how easily price moves relative to volume.
Reading:
- EMV > 0: Price rises with low volume effort → bullish.
- EMV < 0: Price drops easily → bearish sentiment.
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Frequently Asked Questions
Q: What's the difference between main chart and sub-chart indicators?
A: Main chart indicators overlay directly on price charts (e.g., MA, Bollinger Bands), helping identify trends and support/resistance. Sub-chart indicators appear below the price chart (e.g., RSI, MACD) and analyze momentum, volume, or overbought/oversold conditions independently of price visuals.
Q: Which indicator is best for beginners?
A: The RSI is one of the most beginner-friendly tools due to its simple scale (0–100) and clear overbought/oversold signals. Combined with basic moving averages, it offers a solid foundation for learning technical analysis.
👉 Learn how top traders combine simple indicators for high-probability setups.
Q: Can I rely solely on technical indicators?
A: While powerful, no single indicator guarantees success. Always combine multiple tools—like using MACD for trend confirmation and RSI for timing entries—and consider broader market context and risk management.
Q: How do I choose the right settings for indicators?
A: Default settings (like RSI(14), MACD(12,26,9)) work well for most scenarios. Adjust based on timeframe: shorter periods for scalping, longer ones for swing/investing strategies.
Q: Is VWAP useful for cryptocurrency trading?
A: Yes—especially for intraday traders. VWAP helps determine whether the market is trading at a premium or discount, acting as dynamic support/resistance in high-volume markets like Bitcoin or Ethereum futures.
Final Thoughts
Mastering technical indicators isn't about memorizing formulas—it's about understanding what each tool reveals about market psychology and behavior. Whether you're analyzing trends with moving averages or gauging momentum with RSI and MACD, combining main chart and sub-chart tools gives you a comprehensive view of market dynamics.
👉 Start applying these indicators with real-time data and advanced charting tools today.