When trading crypto assets, it is crucial to recognize market conditions. Crypto traders will use several technical analysis tools at the same time to better understand market conditions. This blog will discuss two technical indicators, the Correlation Coefficient & On-Balance-Volume. Thus helping crypto traders make better trading decisions in markets like BTC & ETH.
Correlation Coefficient
The Correlation Coefficient is a mathematical model that indicates the relationship between the two assets. The Correlation Coefficient tells analysts and traders how approximately one asset is similar to the other. It is accurate when both assets are prompt in the corresponding course and negative when the two securities sway in opposite directions. Defining the connection between two assets helps interpret Intermarket correlations, sector relations, and sector-market relationships. The given coefficient also helps traders diversify by classifying assets with a weak or negative association with the crypto market.
The Correlation Coefficient indicator motions within the range of negative one and positive one. However, it is not a momentum oscillator, but it switches between periods of a positive and negative relationship. The positive one is deemed a complete connection, which is considered unique. Anything within the range of zero and optimistic symbolizes that two assets flow in the corresponding direction.
On-Balance-Volume
The On Balance Volume indicator is utilized in TA to measure purchasing and selling influence. OBV is a cumulative trading tool implying that the period’s trade volume is added to the intensifying OBV total when the asset price increases. If the asset price decreases, then that period’s trade volume is deducted from the OBV total. OBV can be beneficial when doing margin trading. However, it can help scan for the usual entry and exit points of a particular crypto asset.
With the point being outlined on a trading chart and measured numerically, the first unique quantitative rate of OBV is not applicable. OBV itself is a total, while the period continues to be set by a dedicated opening point, suggesting the original product value of OBV arbitrarily depends on the origin date. Alternatively, crypto traders and analysts view the quality of OBV changes across time; the OBV line’s inclination offers all of the weight of analysis.
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