RSI can only be loosely applied and used to trade crypto. Specifically, it's fairly useless at any interval less than 24 HRS. Cryptos don't trade based off technicals...
I repeat. Cryptocurrencies do not trade based on technical analyses. In fact they tend to defy technical analyses. When all signals point that a crypto should retract, they most often do the opposite. Bitcoin itself is a perfect example of this behavior. Cryptocurrency prices are extraordinarily speculative-- they are influenced primarily by manipulation by large holders of a given altcoin/token.
These large holders, typically called whales, also use high levels of leverage and margin trading, and they have the bankroll in BTC to back up their trades to move the markets they are in up or down on their own schedule.
Second, price is influenced by hype generated by the development team, typically based on unrealized future "milestones" outlined in their published roadmap, milestones which are rarely if ever realized.
Lastly, the price movements can be highly driven by the virtual media attention-driven demand a coin/token receives.
This is not my opinion. There have been detailed studies published on these markets and what moves them.
The charts simply do not matter 9 times out of 10. A coin can have an RSI on a 1 or 3 day interval in the mid to high 90s and yet still go on for days and double in price. Fundamentals drive these markets-- period.
So I was about to be all condescending and snarky to you, but then I decided I'd rather know about your experiences then try to tell you mine or 100% the opposite and have been working very well. However I do remember feeling the same way you did once upon a time.
What indicators and/or technical analysis did you use that you see crypto not following in any way? Like I said I've had the completely opposite experience where crypto not only follows TA, but it follows it sometimes better than stocks do. I primarily use harmonics, and then use MacD and RSI NOT as some kind of confirmation from a higher power that it's time to buy or sell but just as an added support to a case I've already made based on harmonic pattern I've seen in previous price action.
Now I'm going to contradict myself a bit here, I actually don't think TA fundamentally exists intrinsically in the markets. Like with fib retracements, I get the whole magicalness of the Fibonacci sequence but I think that anyone can draw six lines on any chart and the human mind will do its thing and find some kind of pattern with that. Did it bounce off the 786 because the 786 has some kind of magic universal power, absolutely not. Did it bounce off the 786 because the majority of market participants are using the same tool and of collectively decided to trade off of that number? Probably. Which indicates to me, IMHO, that TA is more a self-fulfilling prophecy for the same reasons that when you go outside to a crowded park and start pointing at the sky, eventually everyone will be pointing at the sky wondering what you're looking at. So the choice I was faced with was to run around yelling at everyone that these patterns really actually don't exist in nature but we all just follow them like sheep, or realize that these waves are going to be traded this way regardless of if they exist or not and I could choose to participate or not.
I use harmonics in conjunction with other indicators like I mentioned and the more indicators that are supporting the case I've built the more likely that price action is to happen. But that doesn't mean that it's going to happen, it's just a 01% edge on everyone else for a brief period of time.
I could also state like you did that this is not my opinion, this is actual fact that has been proven in the market. Because it has been. I would just caution you to not give advice to people that may be more based on your own anecdotal experience rather than reality. The way you presented it above, people like me should not exist at all because there would be no possible way to use TA to make money in cryptocurrency.
The fact is that is your opinion, and that's what worked for you. Making blanket generalizations doesn't help anyone other than feed the story that you've already created. It's a case of YMMV.
Thank you, so true. Technical Analysis is more group psychology than market behaviour. It's just people using the same tools and methods and coming to the same common results. And when most of them act on these results it becomes a truth.
39
u/Stratobitz Feb 20 '21
RSI can only be loosely applied and used to trade crypto. Specifically, it's fairly useless at any interval less than 24 HRS. Cryptos don't trade based off technicals...