What Technical Indicators Can Help Identify a “Dead Cat Bounce” in Crypto Trading?
Indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) can signal divergence or weak momentum during the bounce. Volume indicators are crucial; a lack of significant buying volume during the rally is a major red flag.
Traders also look at moving averages, noting if the bounce fails to cross a significant long-term average.
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 Indicators
Derivation ⎊ Technical indicators, within cryptocurrency, options, and derivatives, represent quantifiable assessments of historical price and volume data intended to forecast potential directional movements or identify market conditions.
Volume Indicators
Indicator ⎊ Volume indicators are technical analysis tools that quantify the amount of an asset or derivative traded over a specific period, providing insight into the conviction and intensity behind price movements.
CAT
Framework ⎊ Within cryptocurrency derivatives and options trading, CAT frequently denotes a customized algorithmic trading framework, often deployed for sophisticated risk management and dynamic hedging strategies.