The essential indicators for starting and progressing in trading
The essential indicators for starting and progressing in trading
Before we can move on to creating a trading bot, which will be one of the main articles on this site, it's essential to first understand the most well-known indicators. We'll begin by looking at the key indicators for starting and progressing in trading.
Indeed, in the world of trading, mastering technical indicators is one of the fundamental pillars for understanding market movements and developing a solid strategy. While some traders use advanced tools or complex systems, the reality is simple: a few well-chosen indicators are more than enough to analyze trends, identify reversals, and make informed decisions. Among the most accessible yet effective tools are moving averages (MA, EMA, WMA), Bollinger Bands, and essential oscillators such as Volume, MACD, RSI, and StochRSI.
These indicators, available on all major trading platforms such as Binance and TradingView , offer a reliable technical basis for anticipating market movements, whether you practice scalping, day trading, or swing trading. Here's a complete overview of these tools, how they work, and their usefulness in building a coherent trading strategy.
πΆ Key indicators
β 1. MA β Moving Average
The moving average is a fundamental tool that helps smooth price movements and identify a clear trend. The MA calculates an average price over a defined period, such as 20, 50, or 200 candles.
It is particularly useful for:
- understand the overall direction of the market,
- filter the noise from rapid fluctuations,
- identify areas of dynamic support or resistance.
The rule is simple:
β‘οΈ Price above the MA β bullish trend
β‘οΈ Price below the MA β downward trend
Although it seems basic, the MA remains one of the most used tools by professional traders.
β 2. EMA β Exponential Moving Average
The EMA is a more responsive variant of the classic moving average. It gives more weight to recent prices, allowing it to detect reversals earlier.
It is ideal for:
- Trend trading
- Identify rapid pulses,
- Analyze the breakouts.
The EMA 9/21 or EMA 20/50 combinations are references in day trading and swing trading.
β 3. WMA β Weighted Moving Average
The WMA (weighted moving average) goes even further than the EMA by placing even greater emphasis on recent prices.
It becomes very useful:
- during periods of high volatility,
- to obtain a highly responsive reading of the market,
- for short- or medium-term strategies.
Used with care, it allows us to capture movements that escape classical averages.
β 4. BOL β Bollinger Bands
Bollinger Bands are a very comprehensive tool because they combine trend and volatility. Composed of a moving average and two bands located a certain distance apart (standard deviation), they allow you to identify:
- the compression (squeeze) phases,
- breakouts,
- overbought and oversold zones.
When the bands tighten, it often signals a strong move. When prices touch the extreme bands, it often indicates excessive volatility or a possible reversal.
Bollinger bands are a cornerstone of breakout and mean reversion strategies.
πΆ Key sub-indicators
β 1. VOL β Volume
Volume is an essential indicator. It measures the true strength of a stock market movement.
Without volume, no technical signal is reliable.
The volume allows for:
- validate a breakout,
- confirm a trend,
- detect manipulations or false signals.
A strong upward or downward movement accompanied by high volume is often a credible movement.
β 2. MACD
The MACD (Moving Average Convergence Divergence) is a very popular trend and momentum indicator. It analyzes the gap between two EMAs to identify:
- the reversals,
- trend accelerations,
- price/indicator divergences.
Its three components (MACD line, Signal line, histogram) allow for a very precise reading of current price movements. The MACD is particularly powerful for anticipating major reversals.
β 3. RSI
The RSI (Relative Strength Index) measures the strength of a movement by indicating whether an asset is overbought or oversold.
Classical interpretation:
- RSI > 70 β overbought market, correction possible
- RSI < 30 β oversold market, possible rebound
But the RSI excels above all in detecting divergences , a very powerful signal for anticipating a trend reversal.
β 4. Stochastic RSI (StochRSI)
The StochRSI is a faster and more sensitive version of the RSI. It reacts very quickly to micro-variations in price, making it an ideal tool for:
- ultra-precise inputs,
- scalping,
- the short-term swing.
It allows for the detection of overbought or oversold zones much more precisely than a classic RSI.
πΆ Examples of simple but effective strategies
1. Trend: EMA 20 + EMA 50 + RSI
2. Breakout: Bollinger + Volume + MACD
3. Correction: Bollinger + StochRSI
4. Momentum: WMA + MACD
π Conclusion
The MA, EMA, WMA, Bollinger Bands, Volume, MACD, RSI, and StochRSI indicators form a comprehensive set for analyzing the market from multiple perspectives: trend, volatility, momentum, and buying/selling pressure. They provide a solid foundation for any trader looking to start or refine their approach. Easy to understand and powerful when combined, they allow for the development of reliable strategies tailored to all trading styles.
In upcoming articles on Market5s, before moving on to creating a trading bot, we'll examine in detail how each of these indicators is calculated based on the market. The example strategies will also serve as a basis for our future simulations and backtests using historical data (Keys to Success in Cryptocurrency Trading) , to verify that our algorithms are not only functional, but also efficient and profitable.