Trading Indicators

The lines under every chart, explained and tested.

Open any trading app and the price chart comes with a menu of indicators: oscillators, averages, bands, each with a default setting and a pair of lines that supposedly say "buy" or "sell". Most people use them without knowing what they calculate, who designed them, or whether they have ever worked once fees are paid.

This section takes them one at a time. For each indicator we show the formula with real numbers, worked by hand and checked against an open-source library. We separate what its creator wrote from what was added later, and we show how much the reading changes with the period, the smoothing and even the hour at which a crypto "day" closes. Then we test the best-known rules on Bitcoin's own history, with trading fees and slippage included, and publish every version we ran, including the ones that lost.

Start with the RSI, the Relative Strength Index: the 0 to 100 line with the 70 and 30 marks that almost every platform shows by default. It comes from an engineer's book in 1978, and the article follows it from that book to four tested rules, across a rising, a falling and a sideways market.

An indicator describes what the price has already done. None of it is a forecast. Nothing in this section is investment advice or a signal to buy or sell, and it does not take your circumstances into account. Trading crypto, especially with leverage, can lose all the money put in.