When it comes to investing in crypto, many different indicators and factors should be taken into measurement in order to achieve an educated investment. Like stocks and options, Cryptocurrencies have charts that are significant players in understanding the market. Yet, other key measurements are also essential to get an advanced understanding of the current situation.

This article will provide you with the five factors that we think are most important to keep under the eye, which are…

Support

After a period of decline, the crypto price tends to bounce back up to a price level known as support. At this point, demand generally builds up, preventing the price from falling any lower, as buyers find the price appealing enough to buy, and sellers are much less inclined to sell. Imagine support as a ground or a floor price, which keeps the price from falling. For better understanding, let’s take a look at the chart (Chart 1)

The green line represents the support level, which keeps crypto from falling below. Take into consideration that support can be changed and varied throughout the chart. 

Resistance

The opposite of support is resistance. When the price meets resistance, buyers are less likely to purchase coins at this price level, while those who own the assets or purchased them earlier find the price appealing enough to sell. You might argue that the resistance level represents the asset’s maximum price as judged by crypto market participants during this time period. In case of resistance, you can simply imagine a roof that prevents the crypto from going beyond (to the moon). In the case of chart 1, the roof price is indicated as a red line. 

To find and draw these lines, you simply need to open tools or use platforms that allow you to change the pattern. Tradingview.com is the best option for such an analysis. 

Trendlines & Patterns

Support and Resistance can show overall crypto trends and patterns when combined. There is an uptrend when both lines point up and vice versa.

In this case, both support and resistance are pointed up, thus showing and representing an uptrend. 

Patterns also play a considerable role in crypto charts, becoming the favorite indicator among traders. Patterns are mainly used to make both short and long-term predictions. Those predictions are made by understanding the market’s current situation using support, resistance lines, and trends. The main idea behind the patterns is to understand recent and famous cycles that repeat throughout time. 

There are many versions of these cycles, which create patterns for us to keep in mind.

On chart 3, you can see different patterns with black lines indicating the crypto behavior and green lines showing the most probable outcome. These patterns are created by various traders in the community throughout the time. 

Moving Average Convergence Divergence (MACD)

Moving Average Convergence Divergence is an indicator created by Gerald Appel in the late 1970s, which is mainly used for technical analysis in stock and crypto markets. The MACD indicator displays the connection between two price-moving averages of an asset. 

By subtracting the 26-period EMA from the 12-period EMA, the MACD is calculated.

Investors use the MACD to determine whether bullish or bearish momentum is strong in order to determine when to enter and quit transactions.

On chart 4, you can see the current SOL price with a MACD indicator below. Represented red and green areas are the MACD histogram, the blue line representing the MACD line, and a red (orange) line indicating the signal line. 

The primary purpose of an indicator is to provide a piece of valid and reliable information for upcoming trends, which is used chiefly for relatively accurate predictions. 

Relative Strength Index (RSI)

The relative strength index (RSI) is a technical indicator that examines the size of recent price fluctuations to determine if a stock or other asset has been overbought or oversold. 

Developed in 1978, RSI is one of the most popular indicators among traders alongside MACD. RSI is also used to understand upcoming market prices depending on the assets buying and selling power. 

Values of 70 or above on the RSI, according to traditional interpretation and use, are a signal that investment is becoming overbought or overpriced and may be ready for a bullish divergence or corrective drop in price. A reading of 30 or less on the RSI suggests that the market is oversold or depressed. 

So basically, when the RSI is above 70%, an asset is deemed overbought, or when it is under 30%, it is regarded as oversold. 

© Edgar Meliksetyan