To help you master gradually, I have divided these 10 indicators into three dimensions: Trend (Dao), Timing (Shu), Risk Control (Dun)
First Dimension: Trends and Capital (Judgment of the Great Way)
Applicable Stages: Newbie Survival, Veteran Direction Setting
Core Logic: Go with the trend, do not go against it; See through trading volume, do not be deceived by false appearances.
1 Moving Average (MA) — The Backbone of Trends
Core Logic: Moving averages are not used for prediction, but to confirm costs. They represent the average holding cost of the market over a period of time.
The True Essence of Practical Combat:
Look at the slope rather than the cross: Golden crosses and dead crosses are often lagging. What truly matters is the direction of the moving averages. If the 30-day and 60-day lines are pointing down, even if the price breaks above the moving averages, it is likely just a rebound (false breakout); only if the moving averages flatten and turn upwards is it a trend reversal.
Lifeline principle: In the cryptocurrency space, just focus on MA120 (half-year line) or MA200 (annual line). When the price is above the line, only look for long opportunities; when the price is below, only look for short opportunities. This is the only standard to distinguish bulls from bears.
2 Volume (VOL) - A witness that won't lie.
Core logic: Price can be drawn, but actual trading volume is hard to fake. Volume precedes price.
The essence of practical combat:
Volume-price divergence (alarm): The price reaches a new high, but the trading volume is less than the previous peak (shrinking volume rise), indicating the main force is not participating, and it's all retail investors pushing, which may collapse at any time.
Breakthrough must come with volume: When breaking through key resistance levels, the trading volume must increase (preferably more than double the usual), otherwise it will be a 'false breakout' and will soon be smashed back to its original form.
A drop with low volume is scarier: Many people think that a shrinking drop is a good thing, but in a bear market, a shrinking decline means no one is buying the dip, and the price will fall freely like free fall due to gravity.
3 MACD - A measuring tool for trend momentum.
Core logic: It measures the acceleration of buying and selling power.
The essence of practical combat:
0 axis determines everything: Abandon purely looking at golden crosses and dead crosses. When both DIF and DEA are above the 0 axis, it is a bull market, and the validity of the golden cross is very high; below the 0 axis, all golden crosses should be regarded as 'weak rebounds' that may fail at any time.
In-flight refueling: The most profitable pattern in a bull market. The fast line (DIF) approaches the slow line (DEA) but does not cross down; instead, it opens up again due to buying pressure. This is a signal for the main upward wave to begin - you must get on board.
4 OBV indicator - The dealer's hidden card (energy tide).
Core logic: Specifically tracks the flow of 'smart money.' When the main force is accumulating, the K-line may remain flat, but the OBV will quietly rise.
The essence of practical combat:
Leading indicator: When the K-line is still in a consolidation phase, or even slightly declining, but the OBV curve has already reached a new high - this is irrefutable evidence of the main force secretly accumulating. Once the accumulation is complete, the coin price will violently rise.
N-shaped breakout: The OBV indicator forms an 'N' shaped breakout, which is often more reliable than the price breakout itself and is a buying signal for many quantitative funds.
Second dimension: Fluctuation and timing (tactical entry).
Applicable stage: Advanced traders, swing trading
Core logic: Finding the extreme points of overbought and oversold, profiting from the market's 'emotional pendulum'
5 Bollinger Bands (BOLL) - A compressor of explosive power.
Core logic: Price always moves from calm (contraction) to violent fluctuation (expansion), repeatedly.
The essence of practical combat:
Capture big trends (contraction): When the upper and lower bands of the Bollinger Bands are very close (extremely narrow bandwidth), and the K-line fluctuates very little, it indicates that the market is accumulating strength. Do not sleep at this time; once the K-line breaks above the upper band and the Bollinger Bands open like a trumpet, it is the starting point for a one-sided surge; jump in!
Middle track determination: The middle track is essentially the 20-day moving average. In an upward channel, the middle track is a solid bottom; every time it retraces to the middle track without breaking, it is a point to add positions.
6 Relative Strength Index (RSI) - The king of divergence.
Core logic: Even in a bull market, the strength will eventually run out. The RSI indicates which side, bulls or bears, is 'gasping for breath.'
The essence of practical combat:
It is not simply about buying high and selling low: Strong currencies can maintain an RSI above 80 for a long time (dullness). Selling based solely on this value can lead to missed opportunities.
Divergence is the killer move: Only when the coin price reaches a new high, but the RSI indicator does not reach a new high (top divergence), and the value is in the overbought zone (>70), is this a precise escape signal. Conversely, bottom divergence is a signal to buy the dip.
7 KDJ indicator - A short-term guerrilla weapon.
Core logic: Reacts very quickly but is also the most prone to noise (false signals), suitable only for ultra-short-term trading.
The essence of practical combat:
J-line extreme value: Focus on the J value. When the J value exceeds 100 for three consecutive days, it means extreme short-term overbought, and a pullback may occur at any time; when the J value is below 0 (negative), it usually indicates a rare short-term rebound buying point.
Weekly KDJ: Abandon the daily line and focus on the weekly KDJ. A golden cross at the weekly level usually indicates the market trend for the next few weeks, with stability ten times higher than that of the daily line.
8 CCI indicator - Extreme market detector.
Core logic: It is specifically designed to capture 'abnormal' bull or bear markets.
The essence of practical combat:
Market range: When fluctuating between +100 and -100, the CCI has no reference value and should be ignored.
Explosion signal: Only when the CCI breaks above +100 from below does it signify that the market enters 'accelerated surge mode.' At this time, do not short; follow the trend to go long. Once the CCI turns around and drops below +100 at a high point, take profit immediately without hesitation.
Third dimension: Risk control and correction (shield of experts).
Applicable stage: Professional traders, asset management risk control.
Core logic: Surviving is more important than how much you earn. Use mathematical laws to revert to the mean and set stop-losses based on volatility.
9 Deviation Rate (BIAS) - The rubber band principle.
Core logic: When the price is too far from the moving average, it is like a stretched rubber band that will inevitably bounce back (revert to the mean).
The essence of practical combat:
Liquidation reversal: When the deviation rate is extremely large (positive deviation), combined with the exchange's 'liquidation data' (a large number of shorts being liquidated), it often indicates a temporary top.
Buying point on a sharp drop: The safest time to buy the dip is when the coin price suddenly plummets, severely deviating from the moving average (great negative deviation). At this time, the probability of a rebound is extremely high; this is called 'oversold rebound.'
10 ATR indicator - A true professional stop-loss tool.
Core logic: This is a unique indicator that does not predict price movements but only tells you 'how much the market is currently fluctuating.'
The essence of practical combat:
Dynamic stop-loss (hanging lamp stop-loss): No more fixed '10% stop-loss.' The professional approach is: stop-loss price = entry price + 2 times ATR.
Principle: If the current normal fluctuation range of the market is 50 points (ATR=50), setting a stop-loss at 30 points will definitely get you shaken out. Set 2 times ATR (100 points) as a safety cushion, which allows you to remain in the market during violent fluctuations and capture the real trend.
Summary: A 'perfect' trading system construction diagram.
Do not use 10 indicators simultaneously, as it will drive you crazy. Please assemble your arsenal according to the following formula:
Determine the direction (choose one): MA moving average or MACD (decide whether to only go long or only short).
Finding opportunities (choose one): Bollinger Bands contracting or RSI divergence (decide which minute to enter).
Verify authenticity (must use): VOL trading volume or OBV (to confirm whether it is a true breakout or a trap by the operators).
Set a defense line (must use): ATR (scientific calculation of position size and stop-loss points).
Remember: Indicators are just the guns in your hand; position management and execution are your bulletproof vests.