Top 10 Technical Indicators To Help You Short Bitcoin In 2021

Short sell Bitcoin

Bitcoin has multiplied in 2020. But what goes up must come down at some point. And when we deal with such a volatile market as the cryptocurrency market, corrections are to be expected and are healthy for the long-term. With futures trading, we can short bitcoin to earn profits in the bear market and in downtrends.

On first glance, it may seem easy to go short on Bitcoin or other crypo assets, but to be proficient in it requires experience and proper analysis. In the following article, we will take a look at 10 most popular indicators that are suitable for shorting Bitcoin.

Top 10 Bitcoin Technical Indicators

As stated, making a trading strategy means a trader needs to learn the trading charts, including technical indicators. The right indicators used can help traders to chart the price movements and forecast the bitcoin price directions, even not 100% accuracy.

We will focus on these 10 indicators to short sell bitcoin in this article: Bollinger Bands; MACD; Williams Alligator Indicator; Exponential Moving Average (EMA); Average Directional Index (ADX); Relative Strength Index; Stochastic Oscillator; On Balance Volume (OBV);  Parabolic SAR; Ichimoku Cloud. All these indicators have their own place in a price chart and work for different purposes. For instance, Bollinger Bands shows a price range that Bitcoin typically traded and reflects recent volatility, while Ichimoku Cloud provides market direction and market entry position.

Next, we are going to elaborate on these indicators, thus we can know how to use correct indicators to gain profits in Bitcoin short sell.

Bitcoin Indicator 1: Bollinger Bands

Bollinger Bands are composed of three orbital lines, of which the upper and lower lines are the price resistance and support line respectively; between the two lines is an average price line. They reflect volatility in Bitcoin price with a wide or narrow trading zone.

When a narrow band presents, it is a signal that the market is about to choose a direction to breakthrough. Be cautious at this point as the price may change very quickly or oppositely. Investors should wait until the direction of the breakthrough is clear and the bandwidth of the Bollinger Bands is enlarged.

This technical indicator can predict the long-term price movement of the trading assets. If the Bitcoin price keeps moving outside of the resistance line, it might be overbought; if it falls under the support line, it might be oversold.

Short sell Bitcoin

Bitcoin Indicator 2: MACD

MACD, or Moving Average Convergence and Divergence, is a trend-following technical indicator, consisting of MACD line, signal line, zero line and histogram. It stresses whether the btc short-term price and btc long-term price keep moving in the same direction. But if not, it indicates whether a trend change is approaching.

This indicator can help traders seize the trading opportunity around the resistance line and support line. The convergence between the moving averages shows a decline in the momentum whereas the divergence expresses an increase. By analyzing this, traders can make sure whether there is a fast or slow fall down in the Bitcoin price, so as to manage their positions better.

Short sell Bitcoin

Bitcoin Indicator 3: Williams Alligator Indicator

Williams Alligator Indicator contains three moving averages. A blue line represents the chin, a red line represents the teeth, and a green line the lips.

The jaw is the equilibrium line of the time frame with a 13-period smooth moving average, and a moving 8 bars in the future direction; and the teeth are the equilibrium line of the lower time frame with an 8-period smooth moving average, and a moving 5 bars in the future direction; while the lips are the equilibrium line of the lowest time frame with a 5-period smooth moving average, and a moving 3 bars in the future direction.

Interactions between the three lines in such btc technical indicators can help identify trends, which would help traders short Bitcoin and make a good return. However, since clear trends are only visible within 15-30% of the time period, it is necessary to follow them and avoid operating in a btc market where fluctuations limits to a certain bitcoin price cycle.

Short sell Bitcoin

Bitcoin Indicator 4: Exponential Moving Average (EMA)

Exponential Moving Average (EMA) assigns different levels of weights and importance to data points based on the time they appear. It is mainly used to identify the dominant market trend and determine the support and resistance level for executing transactions.

EMA is a line pictured on the price chart based on a mathematical formula to smooth the price behavior. Laying great emphasis on recent prices and reducing the weight of previous prices, EMA reflects the latest price changes faster than SMA, which assigns the same weight to all price points during a certain period.

The most-used are the short-term averages of 12-day and 26-day and the long-term averages of 50-day and 200-day.

Short sell Bitcoin

Bitcoin Indicator 5: Average Directional Index (ADX)

As ADX lags behind the price trend, it is not a perfect bitcoin technical indicator. However, if used in conjunction with other bitcoin indicators, ADX can confirm whether there is a trend in bitcoin market and measure the strength of the trend. It can also be used to discover whether the bitcoin market is being adjusted or starting a new trend.

The larger the ADX reading is, the stronger the trend would be. When measuring the strength of a trend, traders need to compare the ADX readings over a few days to determine whether it is rising or declining. An increase in ADX means a stronger trend while a decline means a weaker one.

ADX is a single line that ranges from 0 to 100, where a reading greater than 25 is considered a strong trend. Traders can use this information to gather whether an upward or downward trend is likely to continue.

Short sell Bitcoin

Bitcoin Indicator 6: Relative Strength Index

Relative Strength Index referred to as RSI. It analyzes the market’s intention and strength of buying and selling orders by comparing the average closing gains and average closing losses over a period of time, so as to make trends of the bitcoin future market.

RSI is helpful in recognizing bitcoin market momentum. It is a warning signal of bad market conditions and dangerous price movements. The indicator shows a figure ranging from 0 to 100. If the figure of a cryptocurrency such as Bitcoin is around 70, it means this asset is overbought. When it’s around or lower than 30, it’s oversold.

If RSI indicators of Bitcoin is comparatively high, it’s time to make your technical analysis to short Bitcoin now.

Short sell Bitcoin

Bitcoin Indicator 7: Stochastic Oscillator

Stochastic Oscillator is an interval momentum oscillator btc indicator, displaying the comparison between the closing price and the high/low price range within a defined period. Generally, it is used for three aspects: identifying overbought and oversold levels, identifying divergence, and identifying bull and bear market combinations or signals.

This btc indicator contains two lines of %K and %D on the chart, which combines momentum, RSI, and Moving Averages. It primarily studies the relationship between high/low prices and closing prices, reflects the strength and weakness of btc price trends, and overbought/oversold signals.


Taking full account of the measurement of the stochastic amplitude and short/medium term fluctuation in Bitcoin price, it makes its btc short-term market measurement functions more accurately and effectively than moving averages. It is more sensitive than the RSI in terms of btc short-term market overbought and oversold predictions. Therefore, this indicator adopts widely.

Short sell Bitcoin

Bitcoin Indicator 8: On Balance Volume (OBV)

OBV indicator can confirm bitcoin price trends and detect potential price reversals. It is a simple btc indicator that adds the trading volume during a certain period when the closing price rises and subtracts the trading volume when the closing price falls. The sum of cumulative trading volume plus or minus forms the OBV curve.

The divergence between OBV and the price can transmit a signal of potential price reversal.

If the price reaches a record-low and the decline rate in OBV is less than the previous, it is likely to indicate an upcoming reversal in the previous downtrend. If hits a new high and the ascending range in OBV is less than the previous, it is likely to indicate an upcoming reversal in the previous uptrend.

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Bitcoin Indicator 9: Parabolic SAR

Parabolic SAR uses the parabolic method to adjust the position of the stop loss at any time to observe the buying and selling points. Since the stop loss point (also known as the turning point SAR) moves in an arc, it is called a Parabolic SAR indicator.

It has two meanings. One is “stop”, which means stop loss and it requires investors to set a stop-loss point before buying Bitcoin or selling Bitcoin. As the btc market is unpredictable, this stop loss will need an adjustment accordingly. Parabolic SAR can help traders accurately set the stop loss.

The second meaning is “reverse”, which requires traders to decide a stop-loss price before entering the crypto market. When the price reaches the stop-loss price, traders can perform a reverse short-selling operation while closing the previous position.

Short sell Bitcoin

Bitcoin Indicator 10: Ichimoku Cloud

Ichimoku Cloud indicator, also known as Ichimoku Kinko Hyo, is a popular and flexible bitcoin indicator that shows safe support and resistance levels, momentum, and trend direction.

The indicator provides a clearer picture of price behavior at a glance. Based on the crossing lines and the position of the price corresponding to these lines, Ichimoku Cloud can identify the direction of a trend. It also measures price momentum and signals of trading opportunities.These signals help traders find the best bitcoin entry timing and best bitcoin exit timing.

Short sell Bitcoin

Best Bitcoin Indicators For Day Trading

For those who wish to short in btc market, there are many different bitcoin technical indicators that can be very powerful. However, for certain types of trading, an indicator can really help to see different things on the price chart.

Take Day Trading as an example. Day trading mainly refers to a short position holding time bearing a relatively low risk. It captures the trading opportunities that can immediately make a profit to cover the entry cost after the entry. If traders cannot make a return very soon, they can exit the btc market quickly. The shorter time an order stays in the market, the lower risks traders bear.

But what are the best technical indicators for day trading?

The first one is the Moving Average. It helps to confirm the current market trend, predict btc upcoming trend. And even find the trend that is about to reverse due to excessive extension.

Last but not the least, it’s the Bollinger Bands. It can indicate a price range that Bitcoin typically traded and reflects recent pricevolatility. And it helps traders to find whether the Bitcoin price breaks through the bands, showing higher volatility.

est Bitcoin Indicators For Swing Trading

Swing Trading is a medium-term trading strategy that utilizes price fluctuations to make profits. Judging price trends, swing traders hold Bitcoin for a longer period of time to make profits from fluctuations.

Swing trading strategies use basic or technical analysis to determine whether Bitcoin is up or down in the near future. Traders usually combine technical indicators with price fluctuation records to find the best opportunity to enter the bitcoin market.

So what kinds of bitcoin technical indicators can help swing traders make a return in the huge bitcoin market fluctuation?

It’s obvious that the RSI is most commonly used for swing trading, which shows whether Bitcoin is overbought or oversold at a certain point. It can warn about bad market conditions and dangerous price movements.

The second might be the trading volume, which indicates the bull or bear market. A low volume may state that the market is in a period of consolidation; with a high volume, the Bitcoin market is likely to fluctuate and will have a breakthrough.

Combining Trading Indicators

Reading this article, it’s true that these 10 bitcoin indicators might overlap. But they have their own unique functions in helping investors to chart the Bitcoin price and bitcoin direction. It’s certain that with the combination of different bitcoin indicators, traders can catch up with the bitcoin market changes more easily.

At present, Stochastic and MACD indicators are the most commonly combined bitcoin technical indicators. The Stochastic indicator is a kind of advanced indicator, mainly helpful in short-term operations; MACD is the deviation of the average market cost, generally reflecting the overall trend of a midline.

The advantage of combining indicators is that it can more accurately grasp the short-term buy and sell signals of the Stochastic indicator. At the same time, due to the midline trend reflected by the MACD indicator, the union can determine the medium and short-term fluctuations of Bitcoin price.

In general, for the judgment of short-term trends, the buying and selling signals sent by Stochastic need validation with MACD. If both indicators give the same order, the buying and selling rate will be more accurate.

Top Tip

There is no perfect indicator. Technical indicators are just tools and cannot generate profits themselves. To make a profit, traders are recommended to put the combination of correct indicators and technical analysis into practice.

Traders can use a series of technical indicators to help short Bitcoin, customize them to their individual needs and use them in combination with others.

However, when deciding which indicator is most suitable, traders should consider personal goals, risk tolerance, trading experience, and preferences.

Conclusion

People who have invested in Bitcoin will definitely hold Bitcoin in the long-term, and sometimes it can bring great surprises. But reviewing the historical trend of Bitcoin, we will find that it is difficult to judge the price trend by a few trading days. It seems that the price of Bitcoin is always inflated, thus some traders dare to invest in it.

At this point, it is necessary to correctly use technical indicators to help confirm the best entry time, and to predict the Bitcoin price trend through indicator mapping, detect the risk, and take profit/stop loss timely.

The best way to get started is to make a trade. Bexplus provides 100x leveraged futures trading,where you can open a short position in Bitcoin and use its built-in chart to perform technical analysis by inserting technical indicators. It supports Simulated trading and provides 10 BTC simulated assets, helping investors first familiarize themselves with the platform products, and then short Bitcoin in the real bitcoin market.