Cryptocurrency Signals - Purpose, Types, Risks, How to Read?
Cryptocurrency signals – trading ideas for transactions on exchanges for cryptocurrencies, futures and other instruments. We bring to your attention an article in which we will consider in detail the types of signals, the difference between paid and free signals, and the risks for traders.
The crypto industry is gradually developing, copying trading methods from other financial markets. One of the ways to start trading on a cryptocurrency exchange is to get forecasts on the price movement of certain digital instruments. They are given by companies that can correctly assess the prospects for the development of the situation based on technical analysis or a specific trading strategy and determine where the price of a particular cryptocurrency is most likely to go next.
What Are Crypto Signals?
Predicting the price behavior of cryptocurrencies is difficult. The course is influenced by many factors: large bidders, changes in the rates of other coins, important news, innovation of regulators, the emergence of new crypto projects.
Cryptocurrency trading signals are the optimal points for opening buy / sell transactions, determined on the basis of a detailed analysis. These are advisory notices or marks on cryptocurrency charts. Data is received through special channels, chats, open and closed messengers.
Trading signals contain all the information needed to enter and exit a trade. Ultimately, this reduces the need for upfront research and analysis, making the trading process much easier.
Services with signals differ in approaches to the analysis of the market situation. For some, this is technical analysis, others practice fundamental analysis, and others rely on insider information. But in any case, cryptocurrency trading signals do not guarantee a 100% successful result.
In terms of structure, crypto signals contain the following information:
- Name of the asset;
- Direction of trade;
- Signal reason;
- Entry price;
- Stop-loss level;
- Take profit level.
What Is the Basis for Crypto Signals’ Formation?
The most popular type of trading signal generation is the use of technical analysis. By analyzing the historical price behavior of a digital asset, traders use various indicators and tools to predict future trends and look for market opportunities.
There are four categories of technical indicators: trend indicators, momentum indicators, volume indicators, and volatility indicators:
- Trend indicators show the general direction of the market. They are called oscillators because they move between high and low values, forming a wave-like pattern on charts and graphs. Examples: convergence-divergence of moving averages (MACD), Parabolic SAR, etc.
- Momentum indicators are used to indicate the strength of a trend and its reversal. Most traders use these types of indicators to predict when an asset's price path will change.Momentum indicators include: Average Direction Index (ADX), Relative Strength Index (RSI) and Stochastic Oscillator.
- A class of volume indicators consists of instruments used to determine the intensity of market orders to buy or sell a particular asset. These include: balance volume indicator (OBV), Klinger volume indicator, cash flow indicator, etc.
- Volatility indicators allow you to determine how often the price of an asset changes during a given period. The faster the price changes, the more volatile it is. Example: Bollinger Bands.
Signal generation using fundamental analysis is carried out by an expert or a team of specialists who have knowledge in the field of trading and understand the market. This signal generation method is available in online communities, blogs, Facebook groups, Telegram groups, etc.
This type of analysis is generally considered ideal for long term investors. At its core, fundamental analysis measures the intrinsic value of an asset by valuing all of a company's tangible and intangible assets or investments using publicly available information. The goal is to determine if an asset is undervalued or overvalued.
Benefits of Cryptocurrency Trading Signal
- It makes it easier to find trading ideas.
- There is no need to monitor the market.
- Verified source of information – trader's assistant.
- Saving time in searching for information.
- Experience of professionals. Calculated risks and a reliable forecast contribute to making a profit in a minimum time period.
Cryptocurrency signals are used by traders and investors. Traders are guided by short-term and medium-term signals. Investors prefer long-term signals that last for several months. In this article, we are mainly looking at short-term signals.
Short-term signals, as a rule, are published in various Telegram channels. The quality of the cryptocurrency signal is checked by moderators, protecting the channel from “noise”.
Short-term signals are published every day several times for the same instrument. Medium-term signals are published less frequently, sometimes a couple of times a week per instrument. Such signals are calculated for several days or weeks. Medium-term signals are published in Telegram channels and sent through specialized services.
The formation of medium-term signals is uniquely associated with technical and fundamental analysis. Initially, support and resistance levels are built on 4-hour timeframes and higher. The most significant are selected, from which the price will rebound with a greater probability. These points will be used in signals as market entries. Entry moments are associated with significant political and economic events. News trading is recommended only for experienced traders.
Here technical and fundamental analysis is carried out on daily, weekly and monthly timeframes. Long-term signals are suitable for a Buy and Hold strategy.The principle is that the longer the term of investing in a certain cryptocurrency, the higher the prospective profit. Long-term signals are published even less often. Finding high-quality long-term signals is quite problematic due to the difficulty of predicting the behavior of a cryptocurrency over a long distance.
Paid and free signals
In the signals market, you can find paid and free cryptocurrency signals. Some signals are positioned as insider information, for which they often ask for a paid subscription. Other signals are trading ideas of ordinary traders. There are many free sources. In terms of quality and reliability, some of them are not inferior to paid ones. The main thing is to be able to adequately evaluate information. However, paid sources do not guarantee reliable results. There are many channels where low-quality information is published, which is positioned as “leaks from closed channels”. Other channels can be used to pump cryptocurrencies, participation in which threatens the trader with losses.
Trading by Signals: Long, Short
Let's look at examples of using signals when opening long and short positions.
According to the results of the technical analysis of the pair, CFIBTC is in the consolidation phase. You should pay attention to large volumes of purchases (a sign of the imminent growth of cryptocurrency). A buy signal has been received.
The author of the signal gives information:
- Support level: 530 sat. Timeframe 1D.
- Entry points: 530 - 900 sat.
- Targets: 1000, 1675, 2200, 3000 sat.
We do not set a stop loss, since the probability of a drawdown below 530 sat is insignificant.
If a drawdown below 530 sat occurs, the author recommends using the averaging method.For example, after buying 1000 coins at 700 sat, the price dropped by 530 sat. Then an additional 1000 coins are purchased at this level. As a result, the trader has 2000 coins and the breakeven price is 615 sat. The term for the implementation of a trading idea is from 3 days to 2.5 weeks.
Analyzing the final result, we see that three of the four goals ended positively. The asset rested on a strong level of 2200 sat and the price did not move higher. Profit can be fixed now. A variant of fixing the fourth target is also possible, but only after a downward correction.
If the trader did not have time to open a long position in the recommended range, you can open a long position at the level of 1000 sat, and then close it at 1200 sat. But the profit margin will be less. Profit is fixed gradually in small lots. This process is called a ladder.
Signal processing result
Signals for trading short cryptocurrencies are processed in the same way.
How to Choose a Cryptocurrency Signal Provider?
Of course, at first glance, the main criterion for selecting a crypto signal provider seems to be profitability. The more money a crypto signal brings, the better it is, right? This is wrong.
Choosing a crypto signal provider is difficult, as many companies make false claims or provide results that have a small percentage of accuracy. Therefore, when choosing a signal provider, it is important to know the factors that you should pay attention to.The following are some parameters that can help determine the most reliable signal provider. These are important features that you should definitely pay attention to:
- Setting up risk management. Higher returns are almost guaranteed to mean higher risk.
- Examine the history of drawdowns with the signal provider, if any.
- Signal stability. How long does the signal last? If it brought +50% per month, then this may simply be due to the fact that the market is in an active trend phase.
- Ability to connect a demo account. A test drive is required to check the operation of the signals before connecting a real account.
- Company reputation. What do they say online, what are the reviews? In what jurisdiction is the company registered, by whom is it regulated, is there an audit? Transparent answers to these questions should give you confidence in the crypto signal provider.
- Free Trial or Money Back Guarantee: the best crypto signal providers will allow you to test their services before purchasing a membership. This can be done in various forms. Offers can be a trial period, demo trading or a money back guarantee. The main goal is to be able to learn about the platform.
- Experienced traders and analysts: the quality of the signals depends on the experience of the team. Take some time to look at the qualifications and experience of the team that provide the service.
- Risk Adjustment: higher returns almost always mean higher risk, so check your drawdown history if available.
- Performance: check the accuracy ratio of signal providers to get an idea of their overall performance. Examine the time frame during the day when trading takes place.
- Trading strategy: different signal providers use different trading strategies. The best crypto signal providers usually rely on technical analysis. At the same time, it must be remembered that success in the past does not guarantee profit in the future.
Having chosen a crypto signal provider, you need to figure out what to do next. After subscribing and paying (if it is a paid service), providers send a message to group members with the following information: crypto asset to trade, trade direction, entry point, take profit and stop loss levels.
If messages come via Telegram, it is important to enable notifications. The trade must be executed immediately after the signal is received, as trading opportunities can only last a few minutes (or seconds). Therefore, many companies send a notification that after some time the signal data will be invalid. Once a trade is made according to the data points marked in the signal, traders do not need to follow the trade.
And the most important point is that past performance does not guarantee future profits. This is proclaimed on many websites, but the importance of the assertion cannot be overemphasized.
A special criterion that will weed out many applicants may be the method of signal delivery. This is where personal preferences and circumstances come into play.
How do you see the overall signal processing process?
Can you personally check the signals and execute them manually? But then you may not have time to execute the deal at the price. The pause between the signal and the execution can lead to a significant deterioration in the final performance.
Or do you want to fully automate the process? In this case, you get less control for filtering, but more speed in execution.
Some major providers are working to create their own branded platforms in order to best connect signal providers and investors. In this case, it becomes possible to set up full automation and achieve high speed.
The most common way to deliver crypto signals to traders is via Telegram groups. These groups can be free (open) or paid (closed). Paid ones usually offer additional features or more crypto signals.
Joining a group is easy as the Telegram app is available on your computer, smartphone or tablet. If this is a paid group, then after payment, the providers send an email with a link to join the group. Some providers also offer additional content along with crypto signals, such as videos, weekly webinars, or daily technical analysis of major cryptocurrencies.
Signal providers provide users with free and paid services. This provides more flexibility for traders. The main difference between free and paid trading signals is the frequency of their provision. If the signals are highly accurate, then the higher their frequency, the more opportunities for profit.
By choosing a paid plan, you can receive several times more signals per month than with a free one. However, to test the provider before subscribing to a paid plan, it is better to choose a free service.
Telegram Crypto Signals
Telegram is a messenger that is also popular among investors in the cryptocurrency market. Here you can find both paid / free channels for broadcasting crypto signals, as well as anonymous groups for organizing pumps and dumps.
Twitter Crypto Signals
Twitter is a popular social network. Accounts in it are used by politicians, athletes, and representatives of show business. Cryptocurrency investors and enthusiasts are no exception. Here you can potentially reach a wide audience and find customers. The network is relatively loyal to cryptocurrencies, so sources and repeaters of signals for the crypto market actively promote themselves on Twitter.
Discord Crypto Signals
Discord is an alternative to Telegram. In a platform for communication between gamers, communities are often created to organize Pump and Dump.
Risks for Traders
Trading on cryptocurrency signals is associated with high risks.Consider the most common:
Poor quality signals from suppliers. You need to test paid and free signals.The author is one person or a whole team who often PR on the network. There are many signals from amateur analysts who do not yet have a client base. These should be avoided. To check the quality of the signals, we subscribe for a month, trade the minimum amount (in order to avoid draining the entire deposit). At the end of the subscription, we summarize. In case of a positive result (if most of the transactions are profitable), we renew the subscription. Otherwise, we stop cooperating.
The risk of subscribing to pump and dump. Such schemes are considered gray. They are implemented by the group admin by choosing a low-liquid coin. Sending a signal to buy it occurs through several channels for a larger number of participants. Due to mass buying, the price rises sharply from 15% to 400%. Then it also rapidly declines. The majority of participants suffer losses because they acquire cryptocurrency at a price peak and cannot realize it profitably.
Risk of signal misinterpretation. Any novice trader can misinterpret the cryptocurrency signal and make the wrong decision. If the amount of capital invested in the transaction is large, the risk of draining the deposit increases significantly. The decision to open a trading position should be made based on your own analysis. The signal is just an additional clue;
The risk of signals from bots. Bots do not know how to analyze market information taking into account all factors. Signals are given only in case of a sharp price rise or fall. The trader does not have time to make the right decision in time. The risk of loss is high.
Advantages and Disadvantages of Using Cryptocurrency Signals
- Elimination of the emotion factor: strict adherence to the chosen strategy.
- There are free test versions that help evaluate the effectiveness of the service.
- Easy to use and can lead to better trading results.
- Increasing professionalism: usually the signals are given not by themselves, but with expert explanations (useful for effective learning).
- Automation of processes: signals help not to waste time and effort on a long analysis.
- Service fee. Some services do not have test tariff plans.
- They cannot take into account all the features of the market: for reliability and accuracy, you need to take into account several indicators, compare different signals.
- Services compatible with automated trading on a limited number of crypto exchanges (mainly large trading platforms).
Crypto signals are a set of instructions sent by a signal provider to traders telling them which cryptocurrency to buy, when and at what price, stop loss level and other information.
These trading recommendations are generated manually by trading experts or automatically by trading algorithms. They are based on an understanding of market trends and allow you to predict the possible price movement in the future.
It is possible to receive paid or free crypto signals on Telegram and other social networks or via crypto trading APIs. Most importantly, do not forget that traders should carefully study all the information on the analytics channel before subscribing.
Thanks to crypto signals, experienced traders have the opportunity to save time on developing new trading strategies. For beginners in the crypto industry, signals will help to better understand the market.
At the same time, you need to understand that crypto signals cannot take into account all the features of the market, so it is better to analyze a number of indicators and take a balanced approach to making an investment decision. Whatever reliable indicators are, the entire responsibility for making a decision still lies with the user (trader).
In addition, you must always remember that trading in cryptocurrencies, including trading signals, is fraught with high risks: no one can guarantee the result, even paid services with “insider information”. When buying a paid subscription to a channel or service with signals, you need to weigh all the pros and cons so as not to regret if the investment did not justify itself.
The use of crypto signals is suitable for traders with different levels of experience and training. Beginners can make trades without the need for a deep understanding of the crypto market. For intermediate and advanced traders, this helps automate trading, freeing them up to do other things besides testing strategies and doing analysis. However, despite the benefits of crypto signals, the responsibility for transactions still lies with the trader.
Cryptocurrency signals can save time for a trader and help find a good deal. However, signals are not a guide to action, but only an additional indicator of the market. The trader is solely responsible for all trades. Therefore, traders should be able to analyze the market on their own and use signals only as additional clues.
Modern technologies allow you to copy signals for trading cryptocurrencies in different ways - via Telegram, Discord, Twitter or through specialized platforms. There is no need to rush. Since by subscribing to a signal, you multiply the risks of cryptocurrency fluctuations by the probability of subscribing to a low-quality signal. Be careful.
What crypto signals are the best?
Since crypto trading is of great interest to traders, the crypto market is full of signal providers promising huge returns. But not all providers follow through on their claims. Therefore, it is extremely important to take the time to choose the best cryptocurrency signal provider. The following are parameters that can help identify a reliable provider:
- Whether a free trial or money-back guarantee is available.
- A team of experienced traders and analysts.
- Trading strategy.
Should You Trust Cryptocurrency Trading Signals?
Any bot works on the basis of a mathematical algorithm and gives signals within its template. The accuracy of the signals may vary, but you should always remember that the use of one instrument in different situations cannot take into account all the features of the market at the same time.
This is clearly seen in the example: the bot gives a trading signal based on the strategy of three candles, and according to the Fibonacci lines, it can be seen that the rate has not reached resistance. Thus, if a trader makes a trade at the moment, he may lose funds or earn nothing.
Therefore, it is best to apply an integrated approach, taking into account several tools and assessing the situation.This will help to predict the market more accurately and save you from financial losses.
What is a signal in cryptocurrency trading?
Cryptocurrency trading signals are instructions that contain detailed information on which cryptocurrency to trade, when to trade, at what prices to buy and sell, and at what price to exit a trade, as well as the optimal Stop-Loss level to reduce the loss if the situation goes wrong.
What are pump and dump cryptocurrency signals?
In an attempt to get the most out of the available cryptocurrencies, traders can use a number of strategies. One of them is known as the pump and dump strategy. In this strategy, an individual or legal entity artificially inflates the value of a cryptocurrency.
This can be achieved by providing false information. Basically, this strategy is based on misinformation to increase the price of the cryptocurrency. A price increase in this case is a pump. Once the price reaches the desired level, the owner can start selling it, which is called a dump.