🔨 Best Entry Points in Crypto Trading

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How to Spot the Best Entry Points in Crypto Trading

The fundamental principle of trading is simple: buy low, sell high. However, determining the right time to enter the market remains a challenging task. This is especially true in the highly volatile crypto market, where prices can swing dramatically, creating more opportunities but also greater risks. In this article, we’ll explore various indicators that can help traders identify optimal entry points to make the most of these fluctuations.

Unlike traditional markets, the cryptocurrency market experiences much higher volatility, which can lead to more significant price movements within short time frames.

As a result, the key to capitalizing on crypto’s volatility lies in timing: knowing when to open a position. Traders typically rely on two primary methods to gauge entry points: chart analysis and news events.

While news events, such as regulatory changes, hacks, or cryptocurrency forks, may trigger significant price moves, chart analysis provides deeper insights into market trends and price behaviors. The best trading opportunities often occur when technical indicators align with market-moving news.

We’ll review some of the most common technical indicators that can help you spot these optimal entry points. These include:

  1. Trend Indicator – MACD

  2. Momentum Indicator – RSI

  3. Volatility Indicator – Bollinger Bands

  4. Volume Indicator – OBV

By the end of this article, you’ll have a clear understanding of how these indicators work and how to use them effectively in your crypto trading strategy.

1. Trend Indicator: MACD

One of the most popular tools for confirming trends is the MACD (Moving Average Convergence Divergence) indicator. The MACD consists of two exponential moving averages (EMAs): the 12-period and 26-period EMAs, along with a 9-day EMA called the signal line. The MACD is often displayed as a histogram, helping traders visualize the strength of a trend.

  • When to Enter: A buy signal occurs when the MACD line crosses above the signal line, indicating an uptrend. Conversely, a sell signal arises when the MACD line crosses below the signal line.

The MACD is particularly useful for identifying trend strength and potential reversals, helping you decide when to enter the market with confidence.

2. Momentum Indicator: RSI

The Relative Strength Index (RSI) is a momentum indicator that measures the speed and change of price movements. The RSI ranges from 0 to 100, with values above 70 suggesting an overbought market and values below 30 indicating an oversold market.

  • When to Enter: If the RSI is below 30, it signals that the asset might be oversold, making it a good time to buy. If the RSI is above 70, the asset may be overbought, signaling a possible price correction.

However, in highly volatile markets like crypto, relying solely on the RSI can be risky. During strong bullish trends, such as the 2017 Bitcoin rally, the RSI could remain overbought for extended periods, providing misleading signals. It's best to combine the RSI with other indicators for a more reliable entry point.

3. Volatility Indicator: Bollinger Bands

Bollinger Bands are another useful tool for identifying entry points. The indicator consists of three lines: a simple moving average (SMA) in the middle, with the upper and lower bands representing one standard deviation above and below the SMA.

  • When to Enter: When the price crosses the lower Bollinger Band, it can be a sign that the asset is oversold, and a potential buying opportunity exists. Similarly, if the price touches the upper band, it could indicate an overbought condition, suggesting a potential sell signal.

Bollinger Bands are most effective when combined with other indicators like the RSI. This way, traders can avoid false signals caused by market noise and increase the chances of successful trades.

4. Volume Indicator: OBV

On-Balance Volume (OBV) is a volume-based indicator that uses volume flow to predict changes in price. OBV adds volume on up days and subtracts volume on down days, creating a cumulative line that can help confirm price trends and indicate potential reversals.

  • When to Enter: A rising OBV indicates that buying volume is increasing, which could signal an upward price movement. Conversely, if OBV is falling while prices rise, it could suggest a weakening trend, and a reversal may be imminent.

OBV is particularly useful for confirming the strength of a price trend. If the price is rising and OBV is also increasing, it strengthens the case for a long entry. If OBV diverges from price movements, it can signal a potential reversal.

Best Practices for Spotting Entry Points

While each of the indicators discussed above can be useful on its own, the best trading strategy often involves combining them to confirm entry signals. A powerful entry point occurs when multiple indicators align to suggest a strong trend. For example, if the MACD shows a bullish crossover, the RSI indicates the asset is oversold, and the price crosses the lower Bollinger Band, this combination could provide a solid foundation for opening a position.

Once you spot a favorable entry point, it’s important to set up your trading strategy. Many traders use automated bots or trading platforms to execute their trades, ensuring they follow their strategies without the need for constant manual intervention.

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