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Investments in cryptocurrencies and market noise filters

Currency pairs and cryptocurrencies are governed by their own laws and have their own characteristic, impetuous "temperament". However, many people do not distinguish trading them from the precious metals markets or company stocks, where investing seems to be more stable and predictable. On instruments of the Bicoin market class or currency pairs such as USD/JPY (US dollar and Japanese yen), there is no need to bother looking for a calm and stable trend.

In the article we will look at market noise filters, Renko charts and variations of classic Japanese Heikin-Ashicandlesticks . They can be useful for simplifying investments in cryptocurrencies,they will be the hallmark of some of these markets.

Applying the Renko chart

One of the most effective tools to easily assess the market situation is the Renkochart. Its operation is based on a simple principle. In a graph consisting of red and green "bricks", each of them represents a certain number of points. Thus, Renko is not a graph dependent on the passage of time. During illicurrent sessions, when the cryptocurrency price moves slightly, only a few bricks appear on the chart, allowing us to bypass a large part of the false signals that massively occur during side trends.

Extremely dynamic cryptocurrency markets make the use of noise filters with the help of Renko candles an invaluable help.

Application of Heikin-Ashi candles

Heikin-Ashi is a fairly characteristic variation of typical Japanese candles. It is distinguished by the method of calculation. The immediately visible "smoothing" of the Heikin-Ashi chart is designed to skip insignificant price movements to give the trader the opportunity to accuratelydeterminethe ongoing trend. This is quite a useful feature when speculating on cryptocurrency prices.

Heikin-Ashi and Renko belong to the group of noise filters, finding application during shorter market movements, which do not require such restrictive filtering. In the case of a cryptocurrency exchange, it is recommended to use both tools at the same time,although it is also allowed to use Heikin-Ashi on different time frames, looking for confirmations of signals from charts, e.g. 4 hours on 15 or 5 minute variants.

The methods of filtering the price by Heikin-Ashi candlesticks are much milder than in the case of Renko,which is still a time chart. Their specificity can be useful in scalping-basedstrategies, by keeping the trader in trends for a longer time.

Point and Figure Filter

If we remember the game of "tic-tac-toe", then we will certainly associate with it the charts "Point and Figure". This is quite a popular alternative to the above-mentioned filters. Their operation is based on entering a circle or a cross has a chart when the price exceeds a certain value on the chart.

Line chart

This way will be a solution for supporters of maximum simplicity. Currently, the method is considered archaic, but sometimes it is still effective by limiting price information to the closing price only. This can be useful for plotting trend lines or support and resistance levels.

If we prefer other solutions, then the proven methods of showing the price are charts based on the working volume or the number of transactions accepted on one candle.

Do not forget about referring to time charts, because they are most often used by traders, who are our market competitors.

Before you invest money, check the demo account

The cryptocurrency business should be thought out so as not to become a typical gamble. Noise filters can allow us to create well-thought-out investments, but before creating a live account, i.e. investing in real money, it is worth making sure of the effectiveness of a given strategy. Let's test it first on historical charts and a demo account, they are offered by good so-called cryptocurrency applications. Unfortunately, many people who start their adventure with the stock market skip these two most important stages. Sooner or later, however, this results in significant losses of invested funds.

Author

  • Trainer in the field of finance, as well as a manager and speaker. She enjoys the development and success of her colleagues. He describes himself as an active, dynamic and organized person. Diagnoses the financial problems of his clients. After work, he rides a motorcycle and sails.

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