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Techniques, Indicators, and Applications for Crypto Technical Analysis

Tools for understanding and employing technical analysis

Crypto terminology. The ultimate 2024 guide
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Published in: One Trading · 5 min read

1. Crypto Technical Analysis: Techniques, Indicators, and Applications

Technical analysis in crypto is the great wall that separates profitable crypto trading from gambling and guesswork. Financial market movements can be boiled down to patterns that eventually repeat themselves, indicating entry points, price movements, sell signals, market trend and other possible future outcomes. The study of these market trends is technical analysis, and crypto technical analysis is the key to being a profitable crypto asset trader. 

Unlike fundamental analysis, technical analysis works by relying purely on price patterns and volume data of a crypto chart. Fundamental analysis, on the other hand, is primarily used by crypto investors to understand how the market sees a crypto token, its utility and its place in the ecosystem in the long term. 

2. Basic Technical Analysis Principles

The basics of technical analysis in the crypto market start with understanding how to read crypto charts. Candlestick charts are preferred by traders for understanding crypto market trends.

A candlestick in crypto charts is made up of the body and the wick, where the body represents the opening and closing price while the wicks represent the highest and lowest price points. If the closing prices of a candle were higher than its opening price, it would be green in colour and red in a vice versa case.

The candlestick patterns can be used to draw out support and resistance levels. Support levels are the price points where an asset's price tends to stop falling and may even reverse its downward trend. Support levels are formed due to strong buying interest.

Conversely, a resistance level is a price at which an asset's price tends to stop rising and may even reverse its uptrend trend, due to strong selling interest. Think of the resistance as the upper-bound price level or ceiling. 

Basically, support and resistance levels indicate the supply and demand of the given asset and the positions of market participants.

The price of crypto assets is likely to stay within the support and resistance levels, but when the prices move below the support or above the resistance bands, it's called a trend reversal and is often accompanied by a breakout in either direction, often caused by above-average trading volume.

3. Technical Indicators for Crypto Analysis

There are various indicators for technical analysis, we'll be going over three of the most popular indicators that you can use on the One Trading Exchange.

Simple/ Smoothed Moving Averages SMA

A Simple Moving Average (SMA) is a technical indicator that smooths out price data over a period of time and can be used to identify primary trends and potential trend reversals.

For example, when the current price of a crypto asset is above the SMA, it may indicate an uptrend. On the other hand, if the current price falls below the SMA, it indicates a downtrend. Using a few Moving averages indicators can assist in plotting trend lines. For instance, the 50-day, 100-day, and 200-day moving averages are the most common.

Moving averages can also indicate long-term trends. For example, if the short-term moving average crosses the long-term moving average, a situation known as the golden cross, it's an indication that bull markets are on the horizon. In the image below, the SMAs appear on the top third of the chart with the candlesticks. 

Moving Average Convergence/Divergence (MACD)

The MACD indicator made up of the MACD line, the Signal Line and the Histogram, is another popular technical indicator primarily used to identify bullish or bearish trends and momentum, and based on them, possible entry and exit points.

For example, when the MACD line crosses above the signal line (a bullish crossover), it's a potential entry point. On the contrary, if the MACD line crosses below the signal line (a bearish crossover), it's a potential exit point.

It's important to note that MACD provides relative information. That’s to say an investor or trader should focus on the level and direction of the MACD/signal lines compared with the preceding price movements of the securities in question. The MACD in the image below appears on the middle third of the chart.

Relative Strength Index (RSI)

The RSI is an oscillator that calculates average price gains and losses over a given period of time. The default time period is 14 periods with values bounded from 0 to 100. A reading above the upper-bound 70 mark (the red dotted line) suggests the asset is overbought, which could lead to a correction in price. A reading below 30 is considered oversold (the green dotted line), which could lead to an upward reversal.

In the image below, used for mere illustrative purposes, you can see the overbought line in red which means the market is overheating and there could be a pullback, and the oversold line in green which could indicate a good time to buy. RSI is one of the best indicators to measure market sentiment.

Once you're comfortable with basic technical analysis and have played around with some of the indicators mentioned above, you could alter the time periods being assessed (i.e. 50 vs 100 vs 200 SMAs), and then move on to experiment with more advanced techniques and strategies.

No trading technique or strategy is foolproof and subject to losses. It's important for traders to learn, experiment and consistently update their trading strategies in order to hit consistent profits.

Trading on

Now that you're equipped with the knowledge of crypto technical analysis, you might want to put that knowledge to the test on's regulated crypto exchange, where you can use TA indicators mentioned above on the Exchange, or trade over 100+ crypto-asset and fiat paris seamlessly on a simplified UI.

In this article, we hardly scratched the surface of technical analysis and indicators, but on one trading exchange, you can access over 100 indicators to develop your own trading strategies.

Disclaimer on Technical Analysis:

The information provided here is for educational purposes only and should not be considered financial or investment advice. Trading in crypto or stock markets based on technical analysis involves risk and can result in financial losses. Readers are encouraged to conduct thorough research and make informed decisions. shall not be held liable for any trading losses incurred.

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