One of the biggest risks of using volatility to make gains in cryptocurrencies is being able to observe the asset's movement trends. An asset can be bullish, bearish, and stagnant or congested.
If the investor enters a position at the end of the rally, for example, he may not have time to leave the position with a satisfactory gain to cover the expenses with fees. Also, if the rate of change of trend is too high, you can move from a low gain position to a high loss position - even with the stop loss.
The opposite is true, investing in an asset can also be the best time to sell, that is, really betting on the asset's fall and, if the variation is too sudden, there will also be a loss.
But, the worst situation, ever, for any investor is the moment of congestion, that is, when you are in, more or less, a straight line: if the entry into the asset occurs at this moment, the certainty of not having a gain is of almost 100%, in addition to the expectation of having sudden falls. Almost always taking on annoying losses!
To notice these trends you have the AARON trend indicator.
The Aroon indicator, developed by Tushar Chande, indicates if a price is trending or in range trading. It can also reveal the beginning of a new trend, its strength and also allows you to change from trading ranges to trends. AroonDown and the AroonUp indicators are used together and combined are called the Aroon Up indicators.
AroonUp measures how long it has been since prices have been recorded a new high within the specified period. If the current price is higher then the user defined number of periods before it, then the AroonUp value is %100. In other words, it's a new high for that period. If a new low occurred during the period then AroonDown will be zero. Otherwise it returns a percent valve indicating the time since the new high occurred.
AroonDown measures how long it has been since prices have been recorded a new low within the specified period. If the current price is lower then the user defined number of periods before it, then the AroonDown value is %100. In other words, it's a new low for that period. If a new high occurred during the period then AroonDown will be zero. Otherwise it returns a percent valve indicating the time since the new low occurred.
Therefore, The Aroon indicator is a technical indicator that is used to identify changes in the price of an asset, as well as the strength of that trend. In essence, the indicator measures the time between highs and the time between lows over a time period. The idea is that strong uptrends will regularly see new highs, and strong downtrends will regularly see new lows. The indicator signals when this is happening, and when it isn't.
The indicator consists of the "Aroon up" line, which measures the strength of the uptrend, and the "Aroon down" line, which measures the strength of the downtrend.
The crossing between aaronup and aarondown, as shown in the article, where aaronup rises over aarondown, means the beginning of an uptrend.
If the aarondown crossing overlaps with aaronup, then a downward trend begins.
By simple logic, a trend start ends when another trend starts, but this is a mistake and does not take into account the period of stagnation or congestion.
The Aaron indicator allows you to observe this characteristic when the two trend lines are in parallel.
In this way, the indicator manages to show the investor the probable points of entry, exit and when - in parallel lines - not to invest.
The point, obviously, is that the Aaron indicator must be adjusted to be precise: the periods must be adjusted according to trends that have already occurred so that the periodicity can be corrected.
In addition, trading volume and moving average indicators should be observed.
Also, to increase efficiency and decrease the possibility of losses, the RSI - Relative Strength Index can be used, which will determine the moment of overbought or undersold price.
With these indicators working synchronized, depending on the desired period adjustments, losses can be significantly minimized.
Again, the presentation of this indicator and the suggestion of using other indicators depend on investor to investor, their studies, degree of knowledge and profile.
In this way, it is not a magic formula for not losing money, just a technical presentation of another tool that can help.
Fundamental in this type of analysis is synchronization (does not mean that they are all in the same period, nor is it good that it is) but rather, adjust the tools in a known position, in such a way that the intersections coincide with the start and end scenarios of tendency, besides coinciding, positionally, the moments of stagnation with the parallel lines.
Obviously, gains are not being promised, but a reduction in losses due to the correct use of the indicator, through the study and adaptation of the investor's strategy as he/she wants and, moreover, as he/she understands to be able to take risks.
The maxim of the financial market must always be remembered, through adaptation: "Don't invest, neither time nor money, you cannot lose!"
Building a comfortable and reliable strategy depends on each investor and how much he is willing to study, have discipline and spend time focused on analyzing the assets he intends to trade.
Good negotiation everyone!
