AlexanderLooking for the best indicator for boom and crash trading? Welcome! I will show you the best indicators that will give you realizable signals in this post.
In boom and crash trading, indicators can be of great help in spotting entry points or even confirming trends, but the truth is that all of them are not equally important. Some will give you good signals, while others may give false signals.
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In this article, I’ll show you my top 5 best indicators for boom and crash. I have experimented with and used these indicators for many years, and they have been of great help. So stick around and read carefully so you will be able to grasp everything I will be explaining in this post.
Important: It is not advisable to trade boom and crash only with the signals that indicators give. If you want to become a profitable trader, you need to study market structure, price actions, and candlestick patterns. You will only enjoy the Best Indicator For Boom And Crash when you understand and use them with price action.
4 Best Indicator For Boom And Crash
1. Moving averages
The moving average indicators helps to estimate the average price movement of an asset over a particular period of time. This indicator helps to distinguish between noise in the market and the actual market trend.
When adding the moving average indicators to the chart, you have the option to set their length to different values. The length you set determines the number of candlesticks that the indicators take into consideration before displaying the average price line.
For instance, setting the length of the moving average indicator to 10 means that the indicators will sum up the price (closing price or opening price) of 10 succeeding candlesticks, divide the sum by 10, and then plot the result as a line graph.
Here is how moving average indicator is used to spot entry signals;
When the price is above the moving average indicator, it signals that buyers are in control of the market, and at this point traders should look for buy trades.
On the other hand, when the price is below the moving average indicators, it signals sellers are in control, and traders should look for selling (shorting) trades.
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2. Bollinger Band
The Bollinger Band is another great trading indicator that helps in measuring price volatility of a particular asset.
When added to the chart, Bollinger bands form an envelope having three major levels: the upper band, lower band, and the center line (Period SMA).
The upper and lower band represent the standard deviation from the average price. The center band (Period SMA) is a simple moving average line that shows the average price movement, just like the one we discussed above.
When the width of the upper and lower bands tighten, it signals the likelihood of a price change in direction (Trend reversal).
On the other hand, when the width expands, it signals that an existing trend may be ending.
Bollinger Band signals should not be used alone. You need to confirm with other indicators before you make your trading decision.
3. Relative Strength Index (RSI)
Relative Strength Index (RSI) is an indicator that is used to estimate the relative strength of a price level compared to past prices.
This indicator is used by traders to spot oversold and overbought regions in boom and crash markets.
When you add the RSI indicator to the chart, the upper region RSI value is by default set to 70, the lower region RSI value is set to 30, and the strength of the indicator is set to 14. You can bring changes to this setting depending on your trading strategy.
When the indicator level is above the 70 RSI level, it indicates an overbought market, while a level below 30 indicates an oversold region in the market. Thus, several traders use the 80 RSI value as the reading for overbought conditions and the 20 RSI value for the oversold market.
4. Average True Range (ATR)
The average true range (ATR) is used to measure the volatility of the market by relating the current highs and lows with the recent closing price.
The “true range” is the greatest of the following:
- Difference between “current high” and “current low”
- The absolute value of the difference between the current high and the previous close.
- The absolute value of the difference between the current low and the previous close.
The indicator takes the highest of the above three metrics and then plots it as a signal line.
Because this indicator shows how much the price will move, traders use it to discern the perfect place to put their stop-loss or their take-profit order.
An expanding ATR indicates high volatility in the market with the range of each bar getting larger, while a low ATR indicates low volatility in the market with the range of each bar getting smaller.
What is the best indicator for the trade boom and crash?
The best indicator to trade boom and crash is the one you have determined to give a realizable signal through practice and observation. Different indicators have different use cases. so, depending on what indicator you are using and/or the type of trader you are, you need to practice using any indicator on a demo account and see if they give good signals before using on your live account.
Alexander
