Summary

This article explains which technical indicators are available in Bitvavo's Pro Mode. You will learn how popular tools like the RSI, moving averages, and Bollinger Bands can help you analyze price charts, trends, momentum, and volatility.

Technical indicators use historical price and volume data to help you spot market patterns. They can give you signals about a trend's direction, momentum, and volatility. In the Bitvavo Pro Mode, you can add these indicators directly to your charts.

Trend indicators

1. Moving average (MA)

The moving average (MA) shows you the average price of an asset over a fixed number of periods (for example, 50 or 200 days). This line smooths out short-term fluctuations to reveal the broader trend.

• If the price is above the MA, it often indicates an upward trend.
• If the price is below the MA, it often indicates a downward trend.
• An MA can act as a dynamic level of support or resistance, depending on market sentiment and your chosen timeframe.

2. Exponential moving average (EMA)

The exponential moving average (EMA) is similar to the MA, but it gives more weight to recent price data. Because of this, the EMA reacts faster to price changes, making it a popular choice for short-term analysis. You can look out for:

• When the price closes above or below the EMA.
• Crossovers between two EMAs (for example, when a short EMA crosses over a longer EMA).

These crossovers can signal potential trend changes, though they generally work better in markets with a clear trend rather than in sideways markets.

3. MACD (Moving Average Convergence Divergence)

The MACD is a trend and momentum indicator that calculates the difference between two EMAs (usually the 12- and 26-period EMA). The indicator consists of the MACD line, the signal line, and a histogram. A commonly used signal is:

• Bullish (upward) signal: when the MACD line crosses the signal line from below to above.
• Bearish (downward) signal: when the MACD line crosses from above to below.

MACD signals are usually more reliable in clearly trending markets. In sideways markets, you may encounter more false signals.

Momentum indicators

4. RSI (Relative Strength Index)

The RSI moves between a scale of 0 and 100 and measures the momentum of price movements.

• Above 70: may indicate an overbought situation.
• Below 30: may indicate an oversold situation.

The RSI measures momentum, not an absolute peak or bottom. In strong trends, an asset's RSI can stay above 70 or below 30 for an extended period without the trend immediately reversing.

5. Stochastic oscillator

The stochastic oscillator compares the current closing price to the price range over a specific period. Like the RSI, this indicator moves between 0 and 100.

• Above 80: may indicate an overbought situation.
• Below 20: may indicate an oversold situation.

The stochastic oscillator is often considered more sensitive than the RSI, depending on your settings. This means it can react faster, but it might also produce more false signals.

Volatility

6. Bollinger Bands

Bollinger Bands consist of three lines: a moving average (the middle line), an upper band, and a lower band. The distance between the bands is based on standard deviation and shows the level of volatility.

• Narrow bands: low volatility, which is often followed by a larger price movement.
• Wide bands: high volatility.

When the price touches the upper or lower band, it can indicate a relatively strong movement. However, this is not a standalone buy or sell signal. In strong trends, the price can "hug" one of the bands for quite some time.

Volume and reference levels

7. Volume (Vol)

Trading volume shows how many units of an asset were traded within a specific period. Volume is usually displayed as vertical bars at the bottom of the chart and can help you assess the strength of a price movement:

• A price increase with high volume can indicate broad market participation.
• A price increase with low volume can point to a weaker movement.

Volume is often used to confirm trends, rather than acting as a standalone signal.

8. 52-week high and 52-week low

The 52-week high and 52-week low show the highest and lowest price of an asset over the past 52 weeks. While these aren't technical indicators, they are statistical reference levels followed by many traders. They can act as important psychological barriers:

• When the price approaches a 52-week high, it may encounter resistance or trigger a breakout.
• When the price approaches a 52-week low, some investors may see the price as relatively attractive.

Frequently Asked Questions