Since I primarily trade in the crypto market, some indicators may only be applicable to cryptocurrency trading. This is for reference only.

I. RSI

The RSI (Relative Strength Index) is a momentum indicator used to measure whether an asset is overbought or oversold.

RSI values range from 0 to 100:

  • When RSI > 70, the asset is overbought, suggesting a potential price decline
  • When RSI < 30, the asset is oversold, suggesting a potential price rebound

Key points:

  • RSI Divergence: When price makes new highs but RSI doesn’t, it may indicate a top formation; the opposite is also true
  • Time Frames: RSI on different time frames may give different signals; it’s recommended to analyze multiple time frames

Common RSI Strategies:

  1. Overbought/Oversold Reversal: Look for reversal opportunities when RSI reaches extreme values
  2. Trend Following: During strong trends, RSI may remain in overbought or oversold territory
  3. Divergence Trading: Look for divergence signals between price and RSI

RSI Calculation:

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RSI = 100 - [100 / (1 + RS)]
RS = Average Gain / Average Loss

II. Bollinger Bands

Bollinger Bands consist of a middle band (20-day moving average) and upper/lower bands (standard deviation channels).

The three bands:

  • Middle Band: 20-day Simple Moving Average (SMA)
  • Upper Band: Middle Band + 2 Standard Deviations
  • Lower Band: Middle Band - 2 Standard Deviations

Key Bollinger Band Concepts:

  • Band Squeeze: Indicates decreased volatility, potentially signaling an upcoming breakout
  • Price Touching Bands: May indicate potential reversal signals
  • Band Breakouts: Suggests formation of strong trends

Trading Strategies:

  1. Consider selling when price touches upper band, buying when it touches lower band
  2. Wait for breakout direction confirmation after band squeeze before entering positions
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Upper Band = SMA(20) + 2 * StandardDeviation
Middle Band = SMA(20)
Lower Band = SMA(20) - 2 * StandardDeviation

III. Pi Cycle

Pi Cycle from CoinGlass

The Pi Cycle is used to identify Bitcoin market cycle tops, consisting of two moving averages:

  • 111-day Moving Average (MA) × 2: The faster moving average
  • 350-day Moving Average (MA): The slower moving average

Key Observations:

  • Top Signal: When the two lines intersect, it typically indicates Bitcoin price is near a cyclical top
  • Historical Accuracy: This indicator has accurately predicted several major highs in past Bitcoin markets

Usage Notes:

  1. The actual top may not form immediately after intersection
  2. Only suitable for identifying tops, not bottoms
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Fast Line = MA(111) * 2
Slow Line = MA(350)
Cross Signal = Intersection of Fast and Slow Lines

IV. Bitcoin Dominance

Bitcoin Dominance reflects Bitcoin’s market share in the entire cryptocurrency market:

  • Calculation: Bitcoin Market Cap / Total Crypto Market Cap × 100%
  • Reference Values:
    • Above 60%: Bitcoin dominance, altcoins may face pressure
    • Below 40%: Active altcoin market, possible market euphoria
    • Historical High: Above 90% (pre-2017)
    • Historical Low: Around 33% (early 2018)

Key Points:

  • Rising Index: Capital concentrating in Bitcoin, possible risk-off signal
  • Falling Index: Capital flowing to altcoins, increasing risk appetite
  • Extreme Values: May indicate market cycle transitions

V. Stablecoin Indicators

1. Stablecoin Dominance

  • Calculation: Total Stablecoin Market Cap / Total Crypto Market Cap × 100%
  • Significance: Reflects potential buying power in the market
  • Signals:
    • Rising Ratio: More capital waiting on sidelines
    • Falling Ratio: Capital entering the market

2. Stablecoin Supply Change

  • Calculation: (Current Supply - Previous Supply) / Previous Supply × 100%
  • Significance: Reflects capital flow direction
  • Signals:
    • Supply Increase: Indicates potential for new capital inflow
    • Supply Decrease: May indicate capital exiting the market

3. Stablecoin Liquidity Ratio

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Liquidity Ratio = Major Stablecoins 24h Volume / Total Stablecoin Market Cap
  • High Ratio: Indicates high market activity
  • Low Ratio: Indicates low market activity

Usage Recommendations:

  1. Analyze multiple stablecoin indicators together
  2. Monitor major stablecoins (like USDT, USDC) data changes
  3. Note correlations with other market indicators
  4. Watch for abnormal fluctuations in individual stablecoins

VI. Fear & Greed Index

A comprehensive indicator measuring market sentiment, ranging from 0-100:

  • 0-25: Extreme Fear
  • 26-45: Fear
  • 46-55: Neutral
  • 56-75: Greed
  • 76-100: Extreme Greed

Calculation Factors:

  • Volatility (25%)
  • Market Momentum/Volume (25%)
  • Social Media Sentiment (15%)
  • Survey Data (15%)
  • Bitcoin Dominance (10%)
  • Trends Data (10%)

Personally, I find this index less reliable, especially during bull and bear markets. Crypto market volatility is too high, and sentiment is often manipulated. It’s better used as reference rather than a trading signal.

VII. Funding Rate

A crucial indicator in perpetual futures contracts:

  • Positive Rate: Longs pay shorts, indicating bullish market
  • Negative Rate: Shorts pay longs, indicating bearish market

Strategy Usage:

  1. Extreme rates may indicate short-term reversals
  2. Sustained high rates show strong long sentiment
  3. Sustained negative rates show heavy short pressure

Even if you only trade spot, futures and spot markets are highly correlated. While this may not matter for very long-term investment, it’s worth monitoring for short-term bottom fishing or large trades as it indicates short-term volatility trends.

VIII. Whale Holdings

Monitoring large wallet address holdings:

  • Accumulation Signal: Increase in whale address holdings
  • Distribution Signal: Decrease in whale address holdings
  • Concentration: Changes in top 100 address holdings

Key Observations:

  1. Changes in number of whale addresses
  2. Changes in total whale holdings
  3. Whale transfer behavior patterns

While whales and institutions significantly impact buying and selling pressure, this might be more news-related, but it can serve as a reference indicator.

IX. CME Futures Gap

CME (Chicago Mercantile Exchange) Bitcoin futures often create price gaps due to weekday-only trading while crypto markets trade 24/7:

  • Formation: CME weekend closure while crypto continues trading
  • Gap Types:
    • Upward Gap: Monday open higher than Friday close
    • Downward Gap: Monday open lower than Friday close

Important Features:

  • Approximately 70% of CME gaps eventually fill
  • Gap filling may not occur immediately, could take weeks or longer
  • Larger gaps (>3%) have higher probability of filling

Usage Strategy:

  1. Gaps as potential support/resistance levels
  2. Combine with other indicators to assess gap-fill probability
  3. Avoid over-reliance, use as reference only

X. Important Futures Market Indicators

1. Open Interest

  • Definition: Total number of outstanding futures contracts
  • Signals:
    • Increasing: New money entering, trend likely to continue
    • Decreasing: Money exiting, possible trend weakening
    • Sharp Changes: Potential high volatility ahead

2. Long/Short Ratio

  • Calculation: Long Positions / Short Positions
  • Key Points:
    • Extreme ratios may indicate reversals
    • Differentiate between exchange data
    • Major exchange data more relevant

3. Basis

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Basis = Futures Price - Spot Price
Basis Rate = (Futures Price - Spot Price) / Spot Price × 100%
  • Positive Basis: Bullish market, futures premium
  • Negative Basis: Bearish market, futures discount
  • Widening Basis: Strong market sentiment
  • Narrowing Basis: Market stabilization

4. Liquidation Rate

  • Definition: Ratio of forcefully closed contracts to open interest
  • Significance:
    • High Rate: Intense market volatility, possible cascade effects
    • Concentrated Liquidations: Potential rapid price movements
    • Directional Liquidations: Reflects excessive market sentiment

Usage Recommendations:

  1. Analyze multiple futures indicators together
  2. Focus on major exchange data
  3. Look for cross-validation between indicators
  4. Combine with spot market indicators

The following are commonly used crypto indicators that I’m less familiar with

I. MACD

MACD (Moving Average Convergence Divergence) is an important trend-following indicator consisting of:

  • MACD Line: 12-day EMA - 26-day EMA
  • Signal Line: 9-day EMA of MACD
  • MACD Histogram: MACD Line - Signal Line

Key Points:

  • Golden Cross: MACD crosses above signal line, buy signal
  • Death Cross: MACD crosses below signal line, sell signal
  • Histogram: Reflects trend strength, larger bars indicate stronger trends
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MACD = EMA(12) - EMA(26)
Signal Line = EMA(MACD, 9)
Histogram = MACD - Signal Line

II. OBV (On-Balance Volume)

OBV is a volume indicator particularly suited for cryptocurrency markets, used to confirm price trends:

  • Add daily volume when closing price rises
  • Subtract daily volume when closing price falls

Key Observations:

  • Rising OBV: Indicates buyer dominance
  • Falling OBV: Indicates seller dominance
  • OBV Divergence: Potential reversal when price and OBV trends differ

III. Stochastic RSI

Stochastic RSI (StochRSI) is an enhanced version of RSI, combining stochastic oscillator characteristics:

  • Range: 0-1 (or 0-100)
  • Overbought: Above 0.8
  • Oversold: Below 0.2

Advantages:

  • More sensitive than traditional RSI
  • Earlier potential reversal detection
  • Well-suited for crypto’s high volatility
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StochRSI = (RSI - Lowest RSI) / (Highest RSI - Lowest RSI)