How Can Technical Analysis Indicators Help Identify a Potential Pump and Dump in Progress?
A sudden, massive spike in trading volume accompanied by a sharp, vertical price increase is a primary red flag. The Relative Strength Index (RSI) will often shoot into extremely overbought territory (well above 70).
Additionally, the price action may break away dramatically from moving averages. These indicators suggest a rapid, unnatural influx of capital rather than organic growth, signaling manipulation.
Glossar
Relative Strength Index
Momentum ⎊ The Relative Strength Index, within cryptocurrency, options, and derivatives markets, quantifies the magnitude of recent price changes to evaluate overbought or oversold conditions; its application extends to identifying potential reversals in trend, informing tactical asset allocation decisions.
Technical
Analysis ⎊ Within cryptocurrency derivatives and options trading, technical analysis transcends mere chart pattern recognition; it represents a structured, data-driven approach to forecasting price movements predicated on historical market data and volume.
Pump and Dump
Scheme ⎊ The pump and dump is a classic market manipulation scheme, adapted for the crypto space, where perpetrators artificially inflate the price of a low-liquidity asset through coordinated buying and misleading promotional efforts.
Technical Analysis Indicators
Convergence ⎊ Technical analysis indicators, within cryptocurrency, options, and derivatives, frequently signal potential shifts in market momentum through convergence ⎊ the alignment of multiple indicators pointing to a similar conclusion.
Indicators
Measurement ⎊ Within cryptocurrency derivatives and options trading, measurement transcends simple numerical reporting; it represents a critical lens through which market dynamics and risk profiles are assessed.