How to use indicators in trading

How to use Indicators in Trading

So you want to know how to use indicators in trading crypto. Well, there are hundreds to choose from, so how do you know which ones to use and, more importantly, which ones will work. One thing that you have to remember first is that they are “INDICATORS“, not givens.

Most indicators are derived from price action, which is the most critical part of trading. You MUST understand Price Action first. I do not use indicators to enter or exit a trade. They add probability to a particular trade, and that is all. They indicate what might happen and can increase the probability of that trade.

As a technical trader, probability is all that we have, and indicators can increase our probability. Remember, we only need a slight edge in the market to be a profitable trader. Let’s get into it, and I will show you how to use indicators in trading to increase your probabilities.

Moving averages.

The moving averages are one of the most common indicators used. You will find a lot of strategies use moving averages. So what exactly is a moving average?

Moving average is a simple, technical analysis tool. Moving averages are usually calculated to identify the trend direction or determine its support and resistance levels. The moving average is a lagging indicator because it is based on past prices.

The longer the time period for the moving average, the greater the lag, so a 200 MA will have a greater degree of lag than a 50 MA. The 50 MA & 200 MA are the most common, and institutional investors tend to watch. A 50 day MA adds the value of the last 50 days and divides it by 50 to get an average price.

There are all sorts of Trading Strategies based around the 50 & 200 day moving averages, but I personally don’t use them. I use the 10 & 20 day EMA.

The 10 & 20 Exponential Moving Averages.

The Trader Cobb strategies that I personally use only make use of the 10 & 20 Day EMA. These are the only moving averages I use for all three strategies. Let me show you what they look like and how I use them.

In the image above, the Greenline is the 10 day EMA, and the Redline is the 20 Day Ema. The area between the 10 & 20 is called the Cradle Zone.

You can see when the 10 EMA crosses the 20 EMA, the cradle zone is green, indicating a possible uptrend. The opposite is true for a potential downtrend when the Green 10 EMA crosses over the Red 20 EMA. The cradle zone is then Red. Although they can determine a potential trend, I don’t use them for this; let me explain.

You can see that the price will move away from the cradle zone on the left side of the chart. It is trending up with higher highs and higher lows. When it has stretched or pulled away from the cradle zone, it is only a matter of time, and it will come back to the cradle zone.

The opposite is true in a downtrend. You can see when the 10 EMA moves below the 20 EMA, the price also moves lower and away from the cradle zone before it comes back into the cradle zone. It does not matter how far it moves away. It is like a stretched rubber band; it will come back into the cradle zone.

How I use the 10 & 20 EMA’s.

You have to remember that the EMA’s are only indicators and form only a small part of my trading strategy. Price action is the most important thing. What is price action telling you? For me, certain conditions have to be meet before I place a trade.

One of those conditions is that the entry candle must be in or very close to the cradle zone. You can see how the price will move in and out of the zone, and I don’t want to enter a trade when it is too far away from this zone because it is probable it won’t have enough room to move before it comes back to the cradle zone. Ideally, my entry will be in the cradle zone.

I am not saying you should trade from this, but one of the conditions for a long trade is that there must be a small bullish candle in the cradle zone.

For a short trade, it is just the opposite. I would need a small bearish candle in the cradle zone.

This is how to use indicators in trading. They help to increase the probability of the trade, nothing else.

MACD.

The Moving Average Convergence Divergence or MACD is one of the only other indicators I use. I use the standard settings of 12,26,9. I don’t use the MACD for entry signals. It is a lagging indicator. I use the MACD for trend momentum. I will use it to keep me out of a trade.

Although I use the default settings, I am only interested in the MACD line, so I turn off the Histogram and Signal, so I am only left with 1 MACD line. As I said, this indicator will keep me out of a trade. Let me show you what I mean and how I use it.

One of the other conditions that must be met before I consider entering a trade is that the MACD must agree with the price.

You can see the yellow lines in the image. They are in agreeance. As you can see for the price, the yellow line is drawn from the previous high to the most recent high, and I use those same points on the MACD.

If the second point on the MACD were a lower high, it would be divergent, and that would keep me out of a buy signal.

It is just the opposite for a sell signal, you use the two most recent lows for the price, and the MACD has to agree. The second point on the MACD has to be a lower low, the same as price. Once again, if it is not, it will keep me out of a trade. That is how to use indicators in trading.

Putting it All Together.

I don’t use a lot of fancy indicators the way I trade. I try to keep it simple, and the trading strategies I have learnt from Trader Cobb are just that, simple strategies that work. They are 100% mechanical and use a few simple indicators. Of course, there is much more to the strategy than that.

You need to learn to manage your risk, and you MUST have a good Trading Plan in place. These few indicators form part of a checklist that I use to trade. Several conditions MUST be met before I will consider taking a trade. It will either tick the boxes or it won’t; there is NO, maybe.

The easiest way to learn How to use Indicators in trading is to do the Free Trader Cobb Crypto Course. The free course will give you all the basics that you need to learn the Trader Cobb strategies. Including how to set up your charts, how to open accounts, how to use technical analysis, risk management and much more…

Trader Cobb Strategies.

The best way to get a better understanding of the strategies & indicators I have discussed is to sign up for the free course, where you can watch a series of short videos. Trader Cobb teaches the strategies I use to create Wealth with Crypto.

You can do the Become a Trader course for free.

Everything I have talked about today is covered in more detail in the free course. Even if you want to buy the Become a master course, you need to do the free course first as it covers all the basic that you need to become a master.

The strategies Trader Cobb teaches work on all time frames and all markets, NOT just crypto. They are simple to learn and work very well. You can read a full review here ===> Trader Cobb Review – Is it worth your coin?

 

My Final Thoughts.

There is a lot of rubbish out there, especially in the crypto space. Every Guru seems to be shilling their latest greatest must-have holy grail strategy. Don’t fall for the B.S.

Trading does not have to be hard. Why not try the Free Trader Cobb Course? You will see how easy it can be to create Wealth with Crypto. Trader Cobb will give you everything you need to be a successful crypto trader, NOT just a strategy.

If you want to learn how to use indicators in trading and become a master crypto trader, start your journey with the free course. I have done it, and it was one of the best decision I personally made. Remember to Be the Best you can Be.

Crypto Dave


! DISCLAIMER: I am not a financial advisor. This is not financial advice. The content and material I provide on 2dsirecrypto.com is my opinion only and general in nature. Always do your own research before investing any money. You should always understand the risks involved in trading and investing and seek advice from licensed professionals before undertaking any investments of your own.

6 thoughts on “How to use Indicators in Trading”

  1. This is such an excellent, well-informed article. I lie to you not, information about. cryptocurrencies and bitcoin keep showing up at the right time. I am so glad to have found your article. As a matter of fact, I was just thinking about how I wanted an entire course to teach me how to invest the right ways. To clarify, I joined the free course and was delighted to do so.

    I digress, but is it more substantial to buy a stock or to sell it? Trade? I love how you differentiated the green as 10 days and the red as 20 days. Also, I am looking for a bull trend from here on out.

    Thanks for the share — I gave it a star!!

    1. Glad to hear you enjoyed the post and joined the free course. There have been some good bull runs lately but the good thing about trading is you can make money in a bear market as well. You will learn all about short selling.

      All the best and if I can help with anything in the course just shoot me a message and remember…

      Be the Best you can Be

      Crypto Dave

  2. Thank you for posting this great information.  The single most important thing in trading (or anything else you want to succeed in) is to understand what you’re doing.  Your explanation of MA, EMA and MACD was a nice overview of how you “check the boxes” and decide which product to run with.  I’m going to tune into the first course from Trader Cobb and see what it’s all about!

    1. Hi Cynthia, good to see you are taking the plunge with the free course. I think you will get a lot out of it. Once you get going with it if you need a hand with anything just shoot me a message and I will be more than happy to help where I can.

      Crypto Dave.

  3. Hi, thanks for sharing this article about How to use Indicators in Trading. As a trader myself I think knowing how to use different trading indicators in your trades helps a lot in you becoming profitable especially if you are a newbie and can not trade with naked chart. I enjoy using moving average and 10,30 and 200 EMA.

    1. Hi, just wondering what strategy and what market you are trading with. The 30 EMA is a bit unusual to use,, but we all have our own strategies and well done if that works for you.

      I agree indicators can help, but I also think you can have too many. The simpler you can keep your strategy the better I think.

      Crypto Dave

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