Technical indicators are analytical tools used in technical analysis to evaluate and forecast price trends and movements. They examine statistical patterns in price, volume, and open interest of a cryptocurrency over time. Some common technical indicators used in crypto trading include moving averages, relative strength index (RSI), Bollinger bands, moving average convergence divergence (MACD), stochastic oscillator, on-balance volume (OBV), accumulation/distribution indicator, average directional index (ADX), and Aroon indicator.
These algorithms generate trading signals and identify overbought/oversold conditions, trend strength, momentum shifts, and potential support/resistance levels. Technical indicators can be used on their own or combined with other market analysis techniques to inform trading decisions. By analyzing candlestick charts and identifying certain patterns, traders aim to predict future price action. Technical analysis assumes that historical price behavior will continue into the future.