Serious crypto signal providers use both fundamental and technical indicators to offer a full analysis of a crypto asset. The practice of technical analysis is widely used among cryptocurrency traders. The technical analysis provides a model for analyzing the structure, helping traders measure risk, which is the basis of risk management. Speculators are the main drivers of cryptocurrencies, which makes digital coins an ideal market for technical analysts, as they can thrive by using technical factors and market sentiment only.

Fundamentals show the long term direction of the project which tracks the data, the metrics such as trading volume, liquidity, market capitalization, the total value locked (TVL) in DeFi, circulating supply, the community, the white paper or various other measures of project use case and profitability. Holders usually use fundamental analysis, while traders who buy and sell usually use the technical analysis. Technical strategies, which aim to evaluate a crypto asset’s strength or weakness at a given time, are based on price history displayed in charts and indicators which in combination with each other help analysts interpret price action and predict future moves, so technical analysis can be used to generate crypto signals. 

We at FX Lxleaders employ both types of strategies before opening crypto signals. Although, technical analysis gives us plenty of trade indications to buy and sell cryptocurrencies in whatever market conditions, be it slow and range trading or in strong trends. Our signals are based on well-known and research-based technical indicators such as MACD, Moving Averages, support and resistance, trend lines, candlesticks, etc. Based on these indicators we buildt out crypto technical analysis and strategies, which we then apply to our crypto signals.

Technical Indicators

Technical trading strategies are based on technical indicators, either one of them or more than one, combined with each other as we mentioned above. Using technical indicators should be part of any technical trader’s toolkit when trading cryptocurrencies, as they help traders accurately predict the tops and bottoms of crypto prices over a given time. Adding the right risk management tools, technical analysis could help traders increase gains and minimize losses, while gaining more insight into price action. 

Moving Averages – Moving averages (MAs) are used to provide support and resistance to the price and gauge the overall sentiment during crossovers. that is generally felt throughout the market. We at FX Lxleaders use simple MAs, smoothed MAs and exponential MAs.  Moving averages are calculated by simply taking the average, open or close of the previous candlesticks over a period of time.  

Candlesticks – Candlesticks are very useful in a number of different trading strategies which are either used individually or as a combination with each other to show patterns. They are very good at predicting reversals after reading the story of past price action. Candlesticks show the price fluctuations for a certain period of time, indicating whether buyers or sellers are in charge, which also indicates what direction the next move will take.

Fibonacci Levels – Fibonacci levels are well known and commonly used for long and short term crypto technical strategies. This indicator is inbuilt in most trading and chart platforms and it uses the Fibonacci sequence, which is a close representation of the “Golden Ratio.” The price reacts to these levels which work as support and resistance, offering traders entry and exit zones.

Trendlines – Trendlines are very good at indicating areas where to buy during a bullish trend and where to sell during a bearish trend. Every experienced trader uses trends and trendlines quite often when trading in trendy markets. Cryptocurrencies are very trendy so if you are one of our followers you should have seen many BTC or ETH signals based on Bitcoin technical analysis or Ethereum technical analysis which come after indications from trendlines in combination with other indicators.     

Support and Resistance Levels – Support and resistance levels are great for trading in range-bound markets. We have had many winning crypto trading signals when applying this strategy. This is a very useful strategy when conducting Bitcoin technical analysis in times when there is no trend. The resistance shows the upper boundary of a trading range, while the support shows the bottom of the range during a period.     

Triangles – Out of the geometric shape indicators, triangles work the best, therefore they are the most commonly used. They could be either ascending or descending, but they are great at predicting breakouts.  

Crypto Trend Signals

As we mentioned above, cryptocurrencies tend to be very trendy for certain periods of times, be it bullish or bearish, as the sentiment shifts which leads to massive moves, especially for smaller crypto coins. Therefore, it is the most rewarding crypto trading strategy. Below we have a very trendy market during the beginning of 2021 and our bullish trend Bitcoin trading analysis has shown us many buying opportunities. 

In a trendy market, we wait for pullbacks to end, which are very well indicated by the trendline or moving averages. We like to see a candlestick reversing signal before pulling the trigger for a trade, such as the one in March when the hammer candlestick just touched the ascending trendline and the 50 SMA (yellow) on the daily chart, which is a great bullish buying pattern. The uptrend resumed again after that, resulting in great profits.  

Bitcoin – Daily Chart

Crypto Range Signals

In times when there is no trend in the crypto market, cryptocurrencies usually consolidate for days, weeks or months, before resuming a direction again. Such times present traders with good opportunities to make considerable profit, selling at the top of the range which is called the resistance and buying at the bottom of it which is called the support zone. 

Although, unlike in forex, the support and resistance in cryptocurrencies should be considered as an area, not just a price, due to the huge volatility. For instance, we would leave at least $1,000 as a buffer zone for Bitcoin signals when we bought at the bottom around $34,000 and sold at the top around $45,000.

Support and resistance levels don’t work exactly to the pip for cryptocurrencies

Trading Crypto Breakouts

Breakouts are a good strategy to enter early on a trade and make good profit as the trend begins in the crypto market. Breakouts are usually strong and the moves that follow are large. After Bitcoin traded between $30,000 and $41,000 for several months, a breakout took place as the sentiment in the crypto market improved again. But we didn’t place a buy pending order right above the resistance zone as we would have done in forex. Instead, we waited for the price to dip below the resistance and resurface again before opening a buy Bitcoin signal. 

We also watch the trading volume coming in which has led to the breakout. The price is ultimately moved by volume, so when large moves happen, for the most part it is due to a larger volume. The crypto trading volume is publicly displayed, so when the larger volume is present there is a higher probability that we will see a follow-through in the direction of the move.

Retesting a resistance after the breakout and failing is a great bullish signal

How Crypto Technical Analysis Differs from Forex

Cryptocurrencies Are Very Trendy

The cryptocurrency market is characterized by huge volatility and very large bullish and bearish moves, worth many times the value of most digital tokens, while 4-5 cent moves in forex are considered extreme. Therefore, many traders employ buy or sell only crypto trading analysis. This Solana technical analysis for all its life has produced only two signals, one buy and one sell signals, although very profitable, not likely to be matched in forex.

Spreads Are Huge to Use Certain Strategies

While spreads in forex retail continue to decline, arriving at 0 pips in some cases, in the crypto market, spreads continue to remain huge due to the huge volatility in this market. Asa result, you can’t use certain crypto technical strategies such as scalping, which can be very profitable. Sometimes large spreads make it impossible to trade ranges worth hundreds of pips, which would be normal in forex.     

Technical Indicators Show Zones Rather Than Precise Levels

In forex, technical indicators work much more precisely than in cryptocurrencies, that’s why there are piercings of these indicators in cryptocurrency charts, which often doesn’t mean a breakout. Therefore when we use technical analysis to trade cryptocurrencies, we should leave much more room for the price to wiggle at a support/resistance level or moving average than in forex.