Technical indicators help cryptocurrency traders purchase on the dip along with the exit point from buying or entry on short trades at the top. It also allows traders to take part in the most sensible prices. Bar strength index indicator, also known as BSI, is an elementary technical indicator.
Although, it is compulsory to have a clear idea and comprehension of the efficiency of any indicator while trying to utilize that to implement successful trades. We will disclose the tool and tenable crypto trading strategies utilizing this tool in the coming section.
What is the BSI crypto trading indicator?
It is a manageable and total new technical indicator. It assesses the market data by distinctive calculations, indicating the readings on an individual window. Numerous financial investors endeavors to categorize the BSI indicator as to the RSI. It is not correct to think or mix up the Bar Strength Index with the RSI since the BSI indicator may provide an advantage via its evaluation method that does not go along with the RSI indicator.
However, the BSI is derived from Internal Bar Strength (IBS) indicator. The IBS indicator empowers traders to open sell positions on strengths and take buy positions at the weaknesses. Over thirty years, it has successfully worked on numerous financial assets such as crypto, stocks, commodities, indices, etc.
Top five tips for trading with BSI crypto indicator
Since you already have an idea of the BSI crypto trading indicator, why not proceed on to knowing how to utilize the indicator for trades as a master.
Tip 1. To go long
If you want to go for a long trade on crypto, you have to consider some rules. First, look for the price to reach the support level and have an impulsive bullish candle close after bouncing from that area. Besides, look for the BSI indicator line to reside at the lower red zone level and start moving upward.
Why does it happen?
The BSI crypto trading indicator shows the decreasing strength of the crypto when it is residing in the lower red zone area. So, when the price resides at the support level, and the BSI crypto trading indicator indicates decreasing strength, the cryptocurrency’s price may reverse back to the upside.
How to avoid the mistake?
The crypto market is full of uncertainty, so it is essential to know when you should go for a long trade. Therefore, go for long trade only when the BSI line indicates a low strength at or near the red zone.
Tip 2. To go short
If you want to go for a short trade on crypto, you have to consider some rules. First, look for the price to reach the resistance level and have an impulsive bearish candle close after rejecting from that resistance area. Besides, look for the BSI indicator line to reside at the upper green zone level and start moving downside.
Why does it happen?
The BSI crypto trading indicator shows the extreme strength of the crypto when it is residing in the upper green zone area. So, when the price resides at the resistance level, and the BSI crypto trading indicator indicates extreme strength, that means the price of the crypto may reverse back downward.
How to avoid the mistake?
The crypto market is full of uncertainty, so it is imperative to know when you should go for a short trade. Therefore, go for short trade only when the BSI line indicates an extreme strength at or near the green zone.
Tip 3. Using the Bollinger Bands with BSI indicator
You can use other indicators like Bollinger Bands with BSI to increase the probabilities. It can help you to identify false signals. For example, when the BSI line at the lower red zone signals a long trade, the price resides at the BB upper band. So, it signals you should not go for a long trade.
Why does it happen?
There is no guarantee that the BSI indicator is better than the other. Therefore, you should always use other tools with the BSI indicator to confirm the long and short signals.
How to avoid the mistake?
The BSI indicator helps to identify the trend reversals, but it can also provide false signals. So, you may need to add other indicators with the BSI to identify the proper trend reversals.
Tip 4. Money management
It is a process of balancing your position size to decrease risk while boosting the potential for developing a trading account. The strategy is also used to control the capital suggesting putting 5% or less of the account value into any one trade, not more than that.
Why does it happen?
Since the cryptos are uncertain and volatile, you may lose your whole invested capital within minutes. It is riskier while you are investing in high-leverage assets like crypto futures. Hence, it would help if you implemented an uncompromising limit. It is suggested to risk only 1-2% of the invested money for a particular trade regarding volatile trading assets.
How to avoid the mistake?
Risk management involves:
- Grabbing the right position.
- Understanding how to put and move to stop losses.
- Paying attention to the risk/return ratio.
A strong money management strategy may help in developing a portfolio.
Tip 5. Choose when not to trade
Selecting when to trade and when not is a vital strategy. Most novice traders may send their plan in vein when they get confused and lose several trades. Also, they go for the wrong trades due to panic, and those erroneous trades bring a set of trades by which the traders try to recoup their losses caused by inexperienced executed trades. It leads to even more losses most of the time.
Why does it happen?
Traders should be careful and ensure to avoid over-trade while trading crypto. Overtrading occurs if you have a lot of open positions or take risks without proportioning the capital on a single trade. And it leads your whole portfolio to extreme risk.
How to avoid the mistake?
In most cases, fledglings are ill-famed for over-trading. They often fail to control their emotions and get excited, frightened, or greedy. To keep away from over-trading, you must stick to a rigid trading plan and maintain the discipline to follow the calculated strategy.
Final thought
The BSI indicator is among the most potent composite indicators that are efficient for crypto investors. Hence, the BSI indicator is required if you are willing to understand the market, such as understanding buy and sell signals aforehand the other traders. It also helps in having a perception of investing.
This tool can keep away from numerous drawbacks in trading if the indicator can be appropriately applied. Therefore, practice becoming the master of the BSI concept and afterward entering trades executing BSI in your crypto trading strategies.
