5 Best Technical Indicators for Crypto Trading in 2024

This article explores the 5 best technical indicators for crypto trading—Moving Average, RSI, MACD, Bollinger Bands, and Fibonacci Retracement—emphasizing their combination for stronger signals and diverse uses in market trend analysis.

Written by: Anatol Antonovici   |  Updated June 12, 2024

Reviewed by: Mike Martin

Fact checked by: Ryan Grace

technical indicator chart

Technical indicators are mathematical computations derived from asset prices, volume, or open interest. In this article, we discuss the 5 best indicators for crypto trading.

Table of Contents

🍒 tasty takeaways

  • Cryptocurrency traders use technical indicators borrowed from traditional markets, e.g., stocks and forex.

  • The golden rule for using technical indicators is combining them to confirm stronger signals.

  • There are four primary types of indicators:

    • Trend indicators (MA, MACD)
    • Momentum indicators (RSI, Stochastic)
    • Volatility indicators (BB)
    • Volume indicators (OBV)

Summary

Indicator Description Pros Cons
Moving Average (MA) Averages closing price over a set period; helps determine trends. Identifies market trend, dynamic support/resistance levels. Lagging; irrelevant during market shocks.
Relative Strength Index (RSI) Momentum oscillator measuring price change magnitude. Identifies overbought/oversold levels, trend strength. Can give false signals in strong trends.
MACD Shows relationship between two EMAs; identifies momentum, trend changes. Useful for finding divergences, momentum and trend following. Lags behind price; complex for beginners.
Bollinger Bands (BB) Volatility indicator forming an envelope around price action. Effective in both trending and low volatility markets. Lagging; risky as a standalone tool.
Fibonacci Retracement Plots horizontal lines indicating potential support/resistance levels. Identifies support/resistance, useful in any market condition. Requires experience, involves subjectivity.

 

1. Moving Average

  • Averages closing prices over set periods, smoothing volatility
  • Popular in identifying market trends, used as dynamic support/resistance
  • Includes variations like EMA for recent price emphasis; lagging nature limits effectiveness in market shocks

The moving average (MA) is the most common and oldest indicator. By default, the MA is the average close price of a crypto asset during the last “x” number of periods, e.g., hours, days, weeks. 

For example, a 20-day MA shows the average closing price during the last 20 days. You can customize the indicator by replacing the closing price with the open price, high or low.

Here is what a moving average looks like on a chart:

Source: TradingView

MAs help crypto traders determine the general trend by smoothing out volatility.

There are several types of MAs. For example, the exponential moving average (EMA) gives more importance to the last price changes within the tracked period.

MAs are very popular in bitcoin (BTC) and ethereum (ETH), the two largest cryptocurrencies by market capitalization.

🍒 5 Best Crypto Chart Patterns for 2024

How to use Moving Averages

  1. Golden Cross/Death Cross – when a shorter MA (usually a 50-period one) crosses above a longer MA (such as a 200-period one), we call it a Golden Cross. This usually signals the formation of a long-term bullish trend. When the shorter MA crosses below the longer MA, we expect a long-term downtrend.

     

  2. Support/resistance – the MA can be used as the support or resistance level for the price action.

     

Pros

  • Useful for determining the general market trend.

     

  • Works well as a dynamic resistance and support level.

     

  • Great for crypto beginners.

Cons

  • The indicator is lagging, leading to late entry and exit point signals.

     

  • It becomes irrelevant during market shocks.

     

  • It doesn’t work when the price moves within a horizontal channel.

🍒 Professional investors use both technical and fundamental research. Learn here about the best free Crypto Fundamental Analysis Tools.

2. Relative Strength Index (RSI)

  • Momentum oscillator fluctuating between 0 and 100
  • Identifies overbought (>70) or oversold (<30) conditions, potential for trend reversals
  • Effective in trend strength assessment; less reliable in strong trending or sideways markets

 

The Relative Strength Index (RSI) is a momentum oscillator that measures the magnitude of the latest price change, helping investors assess overbought and oversold conditions.

On a chart, the RSI is an oscillator that fluctuates between 0 and 100.