Trading Bitcoin With The Absolute Price Oscillator
Cryptohopper Newsletter
Market Analysis
Another week of trading means another week of ranging in the Crypto market. Bitcoin is still unable to break the resistance at $10,500, while still holding on to the support. Usually, a long period of stability is followed by a period of volatility. Therefore it can be expected for BTC to make a significant move in the near future. The “Absolute Price Oscillator” (APO) is an indicator that is very useful in swing trading and determining these significant moves.
We will first start by determining what the Absolute Price Oscillator is!
Absolute Price Oscillator
The APO displays the difference between two EMAs of a coin’s price and is displayed as an absolute value. The indicator is thus the difference between the fast exponential moving average (in our case 10) and the slow exponential moving average (in our case, 20).
The indicator provides a buy signal when the line is above 0 and sell signal when it is below 0. When it is above 0, it means that the fast EMA is above the slow one, and when it is below 0, it means that the slow EMA is above the fast one.
When and how is it best used? That’s what we will explore in the next section.
How to use the APO effectively
From our observations, the APO tends to behave better on the larger timeframes than on the smaller ones. On the shorter timeframes, the indicator tends to give out more “fake” signals than on the longer ones. Based on the last bull-run observations, the indicator would work on the 4-hours timeframe with other sell settings such as take profit, stop loss, and trailing stop loss. If used with its sell signals on the 4h timeframe, it may result in lower profits as its sell signals are generally too slow to cover profits adequately.
However, on the 1-day time frame, the indicator has proven to be able to work well with its sell signal. This success can be attributed to the price having a more clear direction than on the smaller timeframes.
Market Analysis
Another week of trading means another week of ranging in the Crypto market. Bitcoin is still unable to break the resistance at $10,500, while still holding on to the support. Usually, a long period of stability is followed by a period of volatility. Therefore it can be expected for BTC to make a significant move in the near future. The “Absolute Price Oscillator” (APO) is an indicator that is very useful in swing trading and determining these significant moves.
We will first start by determining what the Absolute Price Oscillator is!
Absolute Price Oscillator
The APO displays the difference between two EMAs of a coin’s price and is displayed as an absolute value. The indicator is thus the difference between the fast exponential moving average (in our case 10) and the slow exponential moving average (in our case, 20).
The indicator provides a buy signal when the line is above 0 and sell signal when it is below 0. When it is above 0, it means that the fast EMA is above the slow one, and when it is below 0, it means that the slow EMA is above the fast one.
When and how is it best used? That’s what we will explore in the next section.
How to use the APO effectively
From our observations, the APO tends to behave better on the larger timeframes than on the smaller ones. On the shorter timeframes, the indicator tends to give out more “fake” signals than on the longer ones. Based on the last bull-run observations, the indicator would work on the 4-hours timeframe with other sell settings such as take profit, stop loss, and trailing stop loss. If used with its sell signals on the 4h timeframe, it may result in lower profits as its sell signals are generally too slow to cover profits adequately.
However, on the 1-day time frame, the indicator has proven to be able to work well with its sell signal. This success can be attributed to the price having a more clear direction than on the smaller timeframes.