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<center>[source](https://www.moneycrashers.com/best-technical-indicators-trading-stocks/)</center>
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> # In your own words, explain Technical indicators and why it is a good technical analysis tool
In the market, traders make entry or exit positions based on signals or confirmation of signals. Trade that is done without a tangible basis is most likely going to result in a loss.
Technical indicators exist to give us the signals and confirmation to predict price movement and make informed entry or exit positions based on calculations from previous price or market behavior. A variety of technical analysis indicators exists and their use is based on what the trader wishes to accomplish.
Technical analysis uses mathematical calculations based on previous market price to identify important patterns created in the market. Based on these patterns, traders can predict the course to be taken by price or confirm if price really will move like anticipated by other technical analysis. This will help filter out whipsaws or false signals and prevent entry or exit at wrong positions.
The variety of technical analysis indicators allows traders to choose which indicator to use based on their trading strategy. Trend traders will prefer using trend-following indicators like the ADX indicator. A downside of these however will be slow signals since they follow price movement. Technical indicators are best used together to confirm signals and filter out whipsaws, even though they can be used as standalone indicators. Using 2 or more technical indicators filters out false signals and help traders make trades on more reliable signals.
> # Are technical indicators good for cryptocurrency analysis? Explain your answer
Technical indicators are definitely good for cryptocurrency analysis. The only way to make profits in the market is to understand and be able to predict the movements of the market. This is what technical indicators are good for. It goes just beyond understanding and predicting price movements but more importantly, being able to spot the right entry and exit points as well. Like I mentioned earlier, the majority of technical indicators all have their specific uses.
The Bollinger bands can be used to spot points of low market volatility and to identify valid breakouts. The contraction and widening of the of the lines of the Bollinger bands signal low or high volatility. After a long period of narrow bands, a breakout can be expected when prices breaks the resistance or support of the ranging market and the lines of the Bollinger bands begin to widen.
Also, the RSI indicates overbought or over sold regions. These regions define points where a reversal should be expected. An RSI above 70 indicates an over bought region where price is expected to drop down. An RSI below 30 indicates an over sold region where price potentially will go up.
What kind of trades will we be doing if we entered positions without getting or confirming signals that indicate we should make our move? Definitely not profit-making trades as we will make trades based on sentiment and we all know where that will get us. Technicals indicators are therefore not just good for crypto analysis but are great tools for crypto analysis.
> # Illustrate how to add indicators on the chart and also how to configure them.
## Step 1: Launching chart of interest
* To launch my chart of interest, I first visit [tradingview](https://www.tradingview.com/)
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* Then I click on the charts icon showing on the top here to launch charts
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* I have launched my chart. Now to add my indicator.
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## Step 2: Adding Technical Indicator
* After my trade chart has been launched, I click on the fx icon here
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* A search pop up appears for me to search for my indicator of choice. I will be using the Vortex Indicator for this example.
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* I type in `Vortex Indicator` in the search box and I click on it in the results
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* I have successfully added my indicator to the chart. Now to configuring the indicator
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## STEP 3: Configuring my Technical Indicator
* After adding adding my indicator to the chart, I hover my mouse over the indicator the indicator to reveal the hidden settings icon represented by gear circled red. I click on the gear icon to open up the configuration settings.
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**The configuration settings allows me to configure input, style and visibility**
* In the input setting, I can enter the period or timeframe I want my indicator to operate on
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* In the style setting, I can change the color of indicator lines
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* Under visibility settings, I can edit the time conversions that give me minutes, hours, days and others like seen in the screenshot above.
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> # Explain the different categories of Technical indicators and give an example of each category. Also, show the indicators used as an example on your chart. (Screenshot needed)
# Trend-following indicators
As the name suggests, these indicators can show us if the market is in a trending or ranging market. The disadvantage with these category of trend indicators is that they’re lagging indicators since they respond more slowly to price movements. They’re also non-directional as they move higher and higher depending on the strength of a trend and not the direction of the trend. An example of trend-following indicator is Average Directional Indicator.
<center><sub>The ADX indicator on a 1-day BTCUSDT chart</sub></center>
# Volatility-based Indicators
These indicators show market volatility at various points in the market. They operate using swing high points and swing low points to detect rapid price changes outside of said swing points, establishing volatility. An example is the Bollinger Band with 2 lines that contract and widen as volatility in the market changes. The bands contract when there is low volatility and the market is trading in a range, and widen where is high volatility in the market.
<center><sub>Bollinger Bands on a 1-day BTCUSDT chart </sub></center>
# Momentum-based Indicators
The momentum of the market influences price movement. In markets where there is a persistent uptrend or downtrend, momentum indicators show us overbought and oversold regions where we should expect a trend reversal . An example of a momentum indicator is the RSI indicator. When RSI is above 70, an asset is overbought a downtrend is potentially coming. When RSI is below 30, the asset is oversold and a move up or uptrend is expected.
<center><sub>RSI on a 1-day BTCUSDT chart</sub></center>
> # Briefly explain the reason why indicators are not advisable to be used as a standalone tool for technical analysis
No indicator is a 100% accurate. All indicators give false signals sometimes and are vulnerable to whipsaws, especially when used alone. When indicators are used standalone, they’re more prone to whipsaws and false signals. Using indicators in combination with other technical indicators allows us to filter valid signals and false signals giving us more reliable signals on which we can make trades on.
The best thing to do is use technical indicators in combination with other indicators. Using moving average indicators will mostly result in late signals, hence we can use other indicators which give much quicker signals with them to solve the lagging effect and use the moving average to confirm signals given by the other indicator. This ensures that false signals given by one indicator is corrected by the other indicators.
> # Explain how an investor can increase the success rate of a technical indicator signal.
There are a variety of ways to increase the success rate of a technical indicator signal. First of all, we can do this by customizing or configuring the technical indicator according to our trading strategy. This customizability of the technical indicators is so different traders can use them in their desired trading strategy.
Like I mentioned earlier too, what I would consider the best way to increase technical indicator signal is by using two or more indicators. This way, signals given by the different indicators can be compared for conformity to give reliable signals on which we can enter trade positions. A basic tip to increase the success rate is to ensure that we understand the indicators and how to use them to sport important points in the market to maximize profit and cut losses.
# <center>Conclusion</center>
Trading in the market requires observation of market patterns and technical indicators this job perfectly well through mathematical calculations using previous price movement to be able to predict price movement. Using technical indicators allows us to be able to predict the next course of price action. This will enable us anticipate and enter positions that will leave us with good profits.
Another good use of technical indicators is to confirm signals by other technical analysis tools. Even though technical indicators can be used alone, it is best to use technical indicators with 2 or more other indicators to confirm signals and filter out false signals. Trading without a strategy is trading to loss and trading with a strategy requires a technical indicator requires a technical indicator most of the time.
CC: prof @reminiscence01
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Unless otherwise stated, all screenshots were taken by me from [tradingview](https://www.tradingview.com/)
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