Trading the cryptocurrency market using chaikin oscillator

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4 years ago

Chaikin oscillator is an oscillator indicator.

As an oscillator indicator,Chaikin oscillator indicator was created by Mark Chaikin to measure the momentum of accumulation/distribution line of MACD thus helping cryptocurrency traders to know the direction of the market. As an oscillator indicator,it also helps cryptocurrency traders to know whether the market is in an overbought or oversold condition. As an oscillator indicator, chaikin oscillator has an oscillation at point 0 ranging between -100 to +100 and is based on 3-period and 10-period.

Using the 3-period and 10-period,Chaikin oscillator can therefore be calculated using the following formula;

-By subtracting the 10-period Exponential Moving Average of Accumulation/Distribution indicator from a 3 period exponential moving average of Accumulation/Distribution indicator thus we have;

Chaikin Oscillator =EMA(A/D,3)-EMA(A/D,10)

Since chaikin oscillator is based on divergence,it therefore follows that when the price in the market is moving downwards while the chaikin oscillator curve is moving upwards,then a reversal in the market price will take place thus the market will also start moving upwards in the same direction with the chaikin oscillator curve.On the other hand,if the price in the market is moving upwards while the chaikin oscillator curve is moving downwards,a reversal price in the market will take place thus the price in the market will also start moving downwards in the same direction as with the chaikin curve. We will not explain this further. Instead,we will consider the overbought and oversold market condition since it is the one mostly used by traders to enter and exit the market.

1.Oversold chaikin oscillator indicator

Since chaikin oscillator is an oscillator and it has an oscillation at point 0 ranging between -100 to 100,it can therefore enable a trader to know when to enter a buy or a sell position.When chaikin oscillator curve falls below -50 at below 0.00,that will be an indication that the market has become oversold thus signaling the cryptocurrency trader to purchase a given amount of cryptocurrency with their USDT balance. The cryptocurrency trader can either place a market buy order which will instantly be executed or they can place a buy limit order which will be executed when the price in the market reaches their buy limit order. When their order is being executed,their account will start increasing in value if the market is moving upwards.This is indicated as from the candlesticks chart below;

The above is the analysis of the TRX market against USDT. Two points are being indicated. There is point A and point B. Point A represents the chaikin oscillator indicator while point B represents the oversold point. At point B,the chaikin oscillator has fallen below -50 at below 0.00 thus an indication of an oversold market at that point.This signals the cryptocurrency trader to purchase a given amount of TRX with their USDT balance. The trader can decide to place a market buy order which is being processed instantly or they can place a limit buy order which is processed when the price in the market reaches their buy limit order.

1.Overbought chaikin oscillator indicator

Since chaikin oscillator is an oscillator and it has an oscillation at point 0 ranging between -100 to 100,it can therefore enable a trader to know when to enter a buy or a sell position.When chaikin oscillator curve rises above 50 at above 0.00,that will be an indication that the market has become overbought thus signaling the cryptocurrency trader to sell a given amount of cryptocurrency which he will have previously purchased and is currently holding to avoid their account from declining in value.The trader can place a market sell order which will be processed instantly or they can place a limit sell order which will be processed when the price in the market reaches their sell limit order.This is indicated as from the candlesticks chart below;

The above is the analysis of the TRX market against USDT. Two points are being indicated. There is point A and point B. Point A represents the chaikin oscillator indicator while point B represents the overbought point. At point B,the chaikin oscillator has risen above 50 at above 0.00 thus an indication of an overbought market condition at that point. This signals the cryptocurrency trader to sell a given amount of TRX which he had previously purchased and is currently holding to avoid depreciating their account. The cryptocurrency trader can place a market sell order or a sell limit order. The market sell order will instantly be processed while the limit sell order will be processed when the price in the market reaches their limit sell order.When the order is being processed,their account will have increased in value in terms of USDT.