Top 5 Crypto Indicators on MT5

1. Relative Strength Index
2. Moving Average Convergence/Divergence
3. Fibonacci Retracement
4. Bollinger Bands
5. On-Balance Volume

With analysts predicting high valuations for Bitcoin, Tesla investing $1.5 billion in the cryptocurrency, and PayPal and Square adding it to their payment options, there seems to be a lot of support going around for BTC. However, that hasn’t stopped its price from fluctuating wildly. Take mid-March 2021, for example. BTC price broke the $60,000 level for the first time ever on March 13, rising to almost $62,000 on March 14. Then, a pull-back started on the night of March 15, with the digital currency falling to $55,000. However, by March 19, it was back to trading above $58,000.

Volatility is a given in the cryptocurrency market. While this is what presents so many trading opportunities, it is also why traders need to make well-informed trading decisions. This is where a powerful platform like MT5, loaded with a wide range of technical analysis tools becomes essential. This is why crypto traders prefer crypto fx trading brokers who offer this platform. Let’s take a look at the 5 most popular indicators on MT5.

RSI is a measure of the strength or weakness in an asset’s price. It basically indicates whether the asset is oversold or overbought. If the RSI level is under 30, it is taken as a signal of an oversold trading condition, while a value above 70 is considered an indication of overbought conditions. The value ranges from 0 to 100 and is depicted as a wave pattern on charts. RSI has proven to an effective way to identify entry points in crypto trading.

MACD is popular for its simplicity and ability to offer strong signals for crypto trading. This trend-following indicator provides short-term price momentum signals, as well as potential for a trend change.

The indicator has 4 components: the MACD line, zero line, signal line and histogram. When the MACD line moves up, crossing the signal line, it reflects a bullish cross, which traders consider a signal to buy. On the other hand, if the MACD line moves downwards to cross the signal line and then continues below it, traders take it as a signal to sell.

This is a great choice for determining support and resistance levels while trading cryptocurrencies, even via CFDs. Fibonacci levels are derived for a trend similar to the Fibonacci sequence from which this indicator gets its name. The most commonly used Fibonacci levels for cryptocurrency trading are 38.2%, 50%, 61.8% and 100%. 

Once these levels are identified, use the Fibonacci Retracement tool to connect the swing low to the swing high to identify the support level, or the swing high to the next swing low to identify the resistance level. If all those numbers are making your head spin, choose a broker for crypto and fx trading who offers MT5 charting tools, which will do all the calculations for you.

Bollinger Bands are effective for identifying the level of volatility in the market, as well as overbought and oversold trading conditions. The indicator consists of 3 bands:

1. Upper band: 20-day SMA + (20-day standard deviation x2)
2. Middle line: 20-day simple moving average (SMA)
3. Lower band: 20-day SMA – (20-day standard deviation x2)

The upper and lower bands move away from the middle band when volatility is high, and contract towards the middle band during low volatility. When the price of a cryptocurrency moves beyond the upper band, traders take it as a signal of an overbought market. While when the price falls below the lower band, it signals an oversold market.

On the other hand, if the price touches the upper band several times but then retreats, it is considered as the resistance level, while the same occurrence at the lower band can help identify the support level.

This indicator uses volume flow to identify potential price movement and the strength of the underlying trend. When the OBV indicates positive volume pressure, which means that the price is making higher highs, traders consider it as a signal that the price is likely to continue to rise. This then acts as a buy signal. The opposite is true for negative volume pressure.

To make the most of all these indicators, make sure to first familiarise yourself with them on a demo account. Also, choosing a broker who offers crypto trading via CFDs can help you access leverage of up to 1:500, which means that you can increase your market exposure without investing additional capital.

What are your favourite indicators for trading cryptocurrencies? Connect with us on Twitter at @CryptoGTGlobal and share your thoughts.