Trading Indicators MACD, RSI

Studying market indicators and their application in trading is a key aspect for understanding and predicting price movements in the cryptocurrency market. Among the most popular indicators used by traders are MACD (Moving Average Convergence Divergence), RSI (Relative Strength Index), as well as the analysis of support and resistance levels. Additionally, the application of Elliott's theory and candlestick pattern analysis can significantly enhance the accuracy of price movement predictions.

Indicators

The MACD indicator, or the method of trading on the convergence/divergence of moving averages, is one of the most effective tools of technical analysis in the market. Based on the use of several moving averages, MACD combines several indicators into a comprehensive analytical and trading system.

This tool demonstrates stable results across various markets, assets, and timeframes, which is why it has found application not only in the stock market but also among cryptocurrency traders. Created by Gerald Appel in 1979, MACD has become the foundation for many trading systems, including the chaos trading theory by the well-known Bill Williams, and is also used in wave labeling according to Elliott's theory.

MACD is particularly useful for beginners in trading, providing information about the current state of the market through convenient charts. The lines and histograms of the indicator allow for quick identification of the direction of the dominant price trend, moments of trend changes, or the beginning of corrective movements, as well as the volatility of the trading instrument during the given period.

How MACD is calculated and built:

• In the classic variant, MACD consists of two lines - the main line (the difference between the fast EMA with a shorter period and the slow EMA with a longer period) and the signal line (a simple moving average that smooths the main line). The MACD chart is built in a separate window from the main price chart.
• Alternative representations of MACD include a histogram, which visually shows the difference between the main and signal lines. This approach makes the indicator even more convenient for analyzing market conditions.

Using MACD is extremely effective when the parameters of the indicator are chosen correctly and its behavior is understood. Key moments for analysis include local maxima and minima of the main line, crossings of the main and signal lines, as well as moments when the indicator lines cross the zero mark.

The Relative Strength Index (RSI) is one of the key tools of technical analysis, developed by J. Welles Wilder and first presented in the "Commodities" magazine in June 1978. This indicator has gained wide popularity due to its ease of use and ability to provide quality trading signals, which is especially useful in volatile and trending markets.

What is relative strength? The RSI is based on the ratio between the average price increase to the average decrease over a certain period. This metric allows assessing whether buyers or sellers had a greater impact on price during a specific timeframe and forecasting further developments in the market. RSI is calculated using a formula that considers the average price gains on days when the market closed higher than the previous day and the average losses on days when prices declined.

Adjustment and application of the RSI: this indicator does not require complex settings. The main parameter is the number of periods, which is by default set to 14 days. Nevertheless, traders can experiment with different settings to find the optimal strategy for a specific market or timeframe.

RSI is most effective when used in conjunction with other indicators and technical tools, such as support and resistance levels, to create a reliable trading strategy. It is particularly useful in trending conditions, where it can help identify potential entry or exit points in the market.

Trading signals from RSI include divergence, where the indicator and the price chart move in different directions, which may indicate a potential trend change. Levels of overbought (>70%) and oversold (