In the previous lesson, we introduced what technical analysis is and how it works. Next, we will explain the common indicators used in technical analysis of the cryptocurrency market.
Moving Averages (MA)
The goal of Moving Averages, or MAs, or Moving Average, is to construct an easily recognizable trend indicator by smoothing out the price graph, thereby improving the clarity of trading charts. However, moving averages are generated by relying on past price data and are therefore often considered lagging trend followers. Commonly used moving averages include simple moving averages and exponential moving averages
Simple Moving Averages (SMA)
A Simple Moving Average, also known as an SMA, allows traders to take price data from a set period of time and calculate the average price of an asset. Unlike a typical average price, once a new data set is entered into the SMA, the old data set is ignored. Therefore, if a simple moving average is calculated based on 30 days of data, the entire data set is constantly updated and includes only the most recent 30 days of data.
If a trader wants a smoother and slower response to the moving average to price behavior to predict longerterm trend changes, then a longer SMA would be a more appropriate choice. Despite the slower response of the SMA to price behavior, it can still save traders from being cleaned out by false information in oscillating markets.
But also due to the delay, the shortcoming of too much lag, a trader may miss a good entry price or trading opportunity in the short term.
Exponential Moving Average (EMA)
The Exponential Moving Average, also known as the EMA, is similar to the SMA in that the EMA also provides technical analysis based on past price changes. However, the equation in the EMA is more complex than trading the SMA, as the EMA assigns more weight and value to the more recent price inputs.
While both averages are valuable and widely used, EMAs are more sensitive to shortterm price fluctuations and reversals than SMAs. This is why EMAs are particularly popular with shortterm traders.
Moving Average of Convergence / Divergence (MACD)
The Moving Average Convergenc e/ Divergence, or MACD, is a technical analysis indicator that determines the momentum of an asset by showing the relationship between two moving averages. First introduced by Gerald Appel in the 1970s, the MACD is used to determine, at a click, the stock's price change It is used to determine the strength, direction, energy, and trend cycle of a stock's price movement, to find out the pressure and support levels of a stock, and then to find out when to buy or sell.
MACD usually consists of two parts: the exponential movingaverage (EMA) and the signal line. The more commonly used EMAs are the 12day and 26day, and are usually calculated by subtracting EMA (12) from EMA (26), with the result expressed as DIF. The signal line, on the other hand, is based on the average of the 9day EMA and the result is expressed as DEM. Subsequently, the difference between DIF and DEM is represented in the form of a bar chart, i.e. DIF minus DEM.
When the difference (DIF) crosses the signal line (DEM) from below, it is usually considered as a buy signal; conversely, if it crosses from above, it is a sell signal. For some assets, buy and sell signals may alternate frequently and usually need to be analyzed together with other indicators such as RSI, KD, etc.
Relative Strength Index (RSI)
The Relative Strength Index, commonly referred to as RSI, was first created by Wells Wider in 1978 to calculate the comparison of market buying and selling power by comparing the movement of stock prices over a specific period of time, in order to determine the intrinsic strength of stock prices and predict the future direction of price movement. In other words, the RSI analyzes the intentions and strengths of market buyers and sellers by comparing the average closing gain and average closing loss over a period of time, and thus analyzes the future movement of the market.
The formula for calculating RSI is as follows: RSI = [average up ÷ (average up + average down)] x 100. When the indicator is above 50, the current market is strong; when the indicator is below 50, the market is weak. When the indicator rises up to 80, it means there is an overbought phenomenon; on the contrary, when it falls to 20, it means there is an oversold phenomenon. By analyzing the market overbought and oversold, one can expect whether the price will top out or bottom out.
It is important to note that the value of the overbought and oversold indicator may also vary for different assets.
Stochastic Indicators (KD and KDJ)
Stochastic Oscillator, or KD, formerly known as %K and %D (%K&%D). Stochastic indicator, also called KD indicator, was first popularized by George C. Lane in the futures market in the 1950s. The general KD indicator can only be used to determine the phenomenon of overbought and oversold. The KDJ indicator is integrated with the concept of moving average speed, forming a more accurate basis for buying and selling signals.
The KDJ indicator is based on the statistical principle of calculating the highest price, lowest price and the closing price of the last calculation period within a specific period (9 days, 9 weeks, etc.) and the proportional relationship between these three, and then calculating the immature random value RSV of the last calculation period, and then calculating the K value, D value and J value respectively according to the method of smoothing moving averages, and plotting them into a curve to judge the trend. The trend is plotted on a graph.
In the general KDJ indicator chart, K is a fast indicator, which is responsive; D is a slow indicator, which is less responsive. Subsequently, according to the value of the KDJ, it can be divided into several areas: overbought, oversold and hovering areas. Usually, K, D and J values below 20 are considered as oversold zones, which is a buy signal; K, D and J values above 80 are overbought zones, which is a sell signal; K, D and J values between 2080 are hovering zones, which is a good time to wait and see, or add other indicators for comprehensive judgment.
Bollinger Bands (BB)
Bollinger Bands, are often expressed in English as BB or BOLL. BB refers to the bands (price channels) on a chart, indicating the range of price fluctuations up or down. Bollinger Bands are composed of three lines: the upper rail, the lower rail and the middle rail. First created by American stock analyst John Bollinger, Bollinger Bands uses statistical principles to find out the standard deviation of asset prices and their confidence intervals, and thus determine the range of price fluctuations and future trends.
Due to the introduction of the concept of standard deviation, the calculation of Bollinger Bands is relatively more complex than other indicators, with the following formulae for each of the three tracks:
Middle track = Nday moving average
Upper track = Middle track + two times the standard deviation
Lower track = Middle track  two times the standard deviation
In the BB indicator, the upper and lower lines of the range usually change as the price moves up and down. In most cases, the price should operate within the price channel and the closer the price is to the upper line, the closer the asset is likely to be to overbought status. Conversely, the closer the price is to the lower line, the closer the asset is likely to be oversold. If prices are out of the channel range, the market may be in extreme conditions.
Summary
The above has introduced some of the most common technical analysis indicators in the cryptocurrency market. Currently, Bitunix spot and contract trading offers the ability to display technical indicators, and users can easily pick from dozens of technical analysis indicators including MA, MACD, RSI, BB, KDJ, etc. to perform technical analysis on the assets they are interested in.
However, it is important to note that although technical indicators can display data, each person'sinterpretation of the data generated is subjective. In the real world, traders need to be flexible in their judgments and adjustments, and not to be rigid. In the case of technical analysis, the win rate will be higher with more multiple verification in combination with other strategies and technical indicators.
Disclaimer

Crypto investment involves significant risks. Please proceed with caution. The course shall not be considered investment or financial advice.
Next: Lesson 3  Common Up Indicator Combinations