✔️ Information reviewed and updated in December 2023 by Eduardo López
To be an expert in trading, it is necessary to know all the indicators that can help us with our strategies such as the exchange rate. By giving us a forecast signal to predict future price movements, they would be indicating the trends that we are going to study in order to make better decisions.
In this way, with these tools we would be knowing the movement of any cryptocurrency. The most important thing that we must consider about an indicator to use it is to see how it is built, what type of information it is going to provide us, and how it can help us with our strategies.
This time, we will tell you a little more about the exchange rate indicator, which represents the variation between the current price and the price of days ago. Keep reading to know everything about this interesting indicator that can help you a lot.
✨Definition of the exchange rate indicator✨
This indicator is a momentum oscillator, which compares the recent or current price with the price that existed a number of periods ago. It is an option to represent the inertia behind the movement that has a value.
The exchange rate is an overbought / oversold indicator that is above or below 100. In addition, it provides good signals of divergence.
✨ What is the exchange rate for? ✨
The exchange rate indicator serves to confirm price movements or detect divergences, as mentioned above. Also, it can be used as a guide to determine the overbought and oversold conditions that exist.
In general, when prices are rising the exchange rate is positive, and when they are falling it is negative. The fact that the indicator goes up means that there is a strong growth in the price, on the contrary, if the indicator goes down it indicates a strong decline in the price.
The exchange rate indicator can be used with large time frames, which can be from 1 to 200 candles. The most common periods for short and medium term trading are 12-15.
✨ How is it obtained? ✨
The exchange rate indicator calculates the percentage of price change between periods. In order to obtain it, the current price has to be divided by the previous price and multiplied by 100 to express it as a percentage.
It all depends on the calculation period of the indicator, since this determines whether it is an oscillator (period between 5-14) or a trend indicator (period greater than 20). The exchange rate is not synchronized with the price indicator, so it does not have a premediation pattern in its operations.
✨ How is it interpreted? ✨
When the price curve is at a new high while the exchange rate remains below its previous high, then a bullish divergence would be taking place.
On the other hand, when the price curve is at a new low while the exchange rate remains above its previous low, then se would be producing a bearish divergence.