Bringing the Wave Trend to Cryptocurrencies — Technical Analysis

May 27, 2019

Do Oscillators Really Help in Cryptocurrencies?

The helpful trading tools, they come in all shapes, sizes, and functions. Still, the idea of earning profit from the cryptocurrency market can put you on edge. You might still lose your advantage if you don’t know how to use the tools. Your strategy, the trading platform, and the choice of a digital coin are some factors involved. No one can choose these for you, but there’s a way to make them simpler. Ensuring steady, uninterrupted trading requires a healthy mindset.

Anyone with experience will tell you. Holding onto a logical point of view, though your emotions are running wild, is how the profits are made. The Wave-Trend indicator is an emerging tool that can keep you grounded. Digital currencies make better sense with the help of oscillators. Since prices are based on two ranging factors, which are the buy and sell decisions, oscillators can capture your relativity with greater accuracy.

If you’re unfamiliar with Technical Analysis we wrote an in-depth article about how Technical Analysis can Enhance Your Crypto Trading.

How Does the Wave Trend Work?

Oscillators, based on a standard definition, move from one extreme to the next: they move from one range to the other. This is what you want. The dynamic helps us to analyze prices whether they’re high or low. The Wave Trend is among the newer indicators out there. Traders embrace it because of its reversal signals. We can easily decipher prices at their present points. Taking that same information to, instead, see “what’s about to happen” is a different skill.

Reversals will shift the direction of prices, and you’ll want to know about the potentials of a price change. What turns out to be a strong downtrend can quickly revert upward. The idea is to get in on these rallies before they happen. Here’s where the Wave Trend comes in: the trend lines it creates and the color-code it uses signal reversals before they unfold. You can then put in solid trades with better insights on probability.

Moving the Average to a Higher Standard

There are two moving averages used to plot the data of the Wave-Trend indicator.

- The Fast-Wave Period: The fast period is referred to as the signal line. It relies on the most recent prices when collecting its data. That information is plotted out in a line graph, which goes up and down according to prices. Its price sensitivity, which traders often seek, is based on the line reacting to live prices — not those occurring a month ago. The fast-Wave period can be set for any time period you choose, but it should always be relative to the slow period.

- The Slow-Average Period: This charted line is based on longer time periods. Should the fast period be set at 7 days, for example, then your slow period can be set at 21. Historic prices are important, for they show stronger-price trends. The slow period, as compared to its faster counterpart, will steady out while the faster line moves above, to and below it.

-100 to +100 Scale: Both the slow and fast periods are contained within two horizontal lines: one above and the other below. These lines, when starting from the bottom on up, range from -100 to +100. This measure is like a 0 to 100 scale, but the Wave Trend’s negatives indicate stronger oversold conditions. The higher end, instead, reveals when prices are overbought.

Simple: Red and Green-Indicator Lines

The two -100 and +100 horizontal lines are spaced at a distance from each other. They are in “opposing poles”. The top pole is marked as red while the bottom is marked in green.

- Red-Dotted Lines: Overbought signals occur when the fast-and-slow lines cross over the top-red line. Though this line is higher than the green line, it’s marked as red because higher prices are a warning sign. With high prices, traders, those holding onto a coin, often want to take their profits, which leads them to sell, and this makes the red line a sell indicator for digital currencies. The indication at red is for an overbought condition. It will show at roughly +50 to +60.

- Green-Dotted Lines: Oversold conditions, instead, happen when prices are good for buying. Remember that this indicator tracks reversals. When prices are low, there will be traders who see low prices as a bargain. They’ll want to buy and could. Many might consider how much higher prices can get due to where they were before. These traders won’t want to miss out. Oversold conditions begin to unfold when you see the fast-and-slow lines reaching -50 to -60.

A Cryptocurrency Mix

Making the most of trading requires a dynamic strategy. No one can look at naked charts and get the same information that they would if they mixed in a few indicators. The Wave Trend is an option to choose, and it’s certainly worth trying.

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