It is essential to recognize a market trend; however, it is evenly necessary to identify when the market trend ends. For crypto traders, closing out of a trade is more complicated than entering a trade position. This blog will discuss two such technical indicators, the Parabolic SAR indicator & the True Strength Indicator, which will help crypto traders make better trading decisions in trading markets like BTC & ETH.
The Parabolic SAR is an indicator applied by countless crypto traders to define the course of a crypto asset’s momentum and the period when this drive has a higher chance of switching directions. Welles Wilder originated the Parabolic SAR. He also came up with the relative strength index indicator. It is shown as a series of dots placed either above or below a crypto asset’s price on a chart.
As a crypto trader, the most fundamental analysis to have in your mind is where traders use the “dots” location to produce trading signals depending on where the “dot” is located, comparable to the crypto asset’s price. When the “dot” is located below the price, it is considered to be a bullish signal, inducing crypto traders to predict the momentum to continue in an upward trend. On the flip side, when a “dot” is located higher than the price, it will indicate that the bears are in charge of the market and that the momentum is expected to remain on a downward trend.
Using Parabolic SAR is complicated with if/then factors that make it difficult to measure. Because the formulas for rising and falling Parabolic SAR are distinctive, it is simpler to divide the prediction into two parts. The first prediction covers rising Parabolic SAR, and the second covers falling SAR.
The Parabolic SAR is a universal trading tool primarily used by crypto traders to define the future short-term asset momentum. And it can also be utilized with another trading strategy, allowing a crypto trader to decide where to place their orders.
True Strength Indicator
William Blau founded the true strength index (TSI) indicator to help traders determine if the market had undergone an overbought or oversold market condition. Like the crossover momentum oscillator, the TSI indicator has two crossover lines, the red and blue lines. The red line marker shows the flag line, while the blue line portrays the TSI. TSI indicator has uncertainty at point zero, which varies from -100 to 100. When a crossover happens at above 25, this indicates an overbought market condition, while below -25 indicate an oversold market condition.
Like other momentum oscillators, traders should solely use the TSI when the asset price is trending. Applying TSI when the asset price is moving sideways or consolidating is not ideal as this will produce a wrong signal for the trader. There are several ways to use the TSI; for instance, the first way is to look out for crossovers. In most situations, when the two plot lines produce a crossover, it usually means there is a new trend starting for that crypto asset.
One of TSI’s good traits is that traders can use it to distinguish both the trend course and the trend strength, making it one of the most popular trading tools to use.
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