Technical analysis is a cornerstone of effective cryptocurrency trading, providing valuable insights into potential market movements. For traders focusing on the Ethereum to US Dollar (ETH/USD) pair, leveraging a structured set of indicators can significantly enhance decision-making. This guide explores a comprehensive trader's cheat sheet, detailing how to utilize technical indicators, pivot points, moving averages, and standard deviation for informed trading.
Understanding the Trader's Cheat Sheet
A trader's cheat sheet compiles 50 commonly used technical indicators, each with a projected price level for the next trading day. These projections indicate the price point at which a specific signal would be triggered, offering a forward-looking perspective based on end-of-day data. The sheet updates daily upon market settlement, ensuring relevance for the current or next session depending on market hours.
The cheat sheet organizes signals hierarchically, listing them from the highest projected price at the top to the lowest at the bottom. Each entry is color-coded: blue shading denotes a generally bullish interpretation, while red indicates a bearish outlook. This visual cues helps traders quickly assess market sentiment.
Key interpretations include:
- Blue areas below the last price often act as support levels, potentially limiting downward moves.
- Red areas above the last price typically serve as resistance, capping upward movements.
- Blue above the last price may confirm an upward trend, providing support.
- Red below the last price can reinforce a downward trend, acting as resistance.
This structure aids in identifying potential breakouts or consolidation phases. For instance, a concentration of blue below and red above the current price might suggest a trading range, while blue above or red below could indicate an impending breakout.
Key Technical Indicators Explained
Stochastic Oscillators
Stochastic oscillators are momentum indicators comparing a particular closing price to a price range over a specific period. Barchart’s custom definitions include:
14-Day %K Stochastic Stalls:
- Calculate Value1 as (3 times %K Stochastic minus 2 times Raw Stochastic).
- Derive Value2 by subtracting the 14-day lowest low from the 14-day highest high and dividing by 100.
- The stall level equals (Value1 multiplied by Value2) plus the 14-day lowest low.
14-Day %D Stochastic Stalls:
- Compute Value1 as (3 times %D Stochastic minus 2 times %K Stochastic).
- Value2 is identical to the %K calculation.
- The stall is (Value1 multiplied by Value2) plus the 14-day lowest low.
These stalling points help identify potential reversal zones where price momentum may pause or shift.
Pivot Points for Intraday Trading
Pivot points are crucial for identifying intraday support and resistance levels. Calculated from the prior day’s high (H), low (L), and close (C), they include:
- Pivot Point (PP): (H + L + C) / 3
- First Resistance (R1): (2 * PP) - L
- Second Resistance (R2): PP + (R1 - S1)
- Third Resistance (R3): H + (2 * (PP - L))
- First Support (S1): (2 * PP) - H
- Second Support (S2): PP - (R1 - S1)
- Third Support (S3): L - (2 * (H - PP))
These levels are based on end-of-day data and apply to the current session if markets are open or the next session if closed.
Moving Averages
Moving averages smooth price data to identify trends. The cheat sheet emphasizes periods historically popular among traders: 9-day, 18-day, and 40-day. These values represent the price ETH/USD must reach to be considered "above" the moving average, signaling potential bullish momentum. Unlike chart-based averages, these are precise calculated targets.
Standard Deviation Volatility Bands
Standard deviation measures past volatility, projecting statistically probable trading ranges. Calculated using 5-period closing prices:
- Compute the average closing price over 5 days.
- Determine the variance of each price from this average.
- Square each variance value.
- Sum all squared variances.
- Multiply by 2 for 2 standard deviations or 3 for 3 standard deviations.
- Divide by the number of data points minus one.
- Take the square root of the result.
Interpretations:
- 1 Standard Deviation: Encompasses ~68% of price moves, suggesting the market will stay within this range 2 out of 3 days.
- 2 Standard Deviations: Covers ~95% of moves, with breaches occurring roughly monthly.
- 3 Standard Deviations: Includes ~99.7% of activity, with violations expected less than annually.
These bands help set realistic expectations for price volatility and potential reversal points.
Practical Application and Limitations
While the cheat sheet offers valuable projections, traders should note that extreme projections far from current prices may be irrelevant. Focus on levels closer to the action for timely signals. A projection of 0.00 indicates a signal is impossible to trigger based on current data.
Additionally, the sheet requires at least five days of trading data to generate accurate calculations. For assets like ETH/USD with continuous trading, this is rarely an issue, but newcomers might face brief delays.
👉 Explore advanced trading strategies to complement these technical tools.
Frequently Asked Questions
What is the primary purpose of a trader's cheat sheet?
It provides a consolidated view of key technical indicators and their trigger prices, helping traders anticipate potential market movements and plan entries, exits, and risk management strategies efficiently.
How often is the cheat sheet updated?
It updates daily upon receiving the settlement or end-of-day price data, ensuring projections are based on the latest available information for accuracy.
Can pivot points be used for cryptocurrencies like ETH/USD?
Yes, pivot points are effective for identifying intraday support and resistance in crypto markets, though volatility may require wider bands compared to traditional assets.
Why are multiple standard deviation levels important?
They offer tiered insights into volatility and probability, allowing traders to assess likely ranges and potential outlier events for better risk assessment.
Do moving averages on the cheat sheet differ from chart-based ones?
Yes, the cheat sheet provides exact price targets to cross for signals, whereas charts display historical averages visually, which might lag.
How reliable are stochastic stall signals?
They indicate potential momentum shifts but should be combined with other indicators for confirmation, as false signals can occur during sideways markets.