Open the Binance contract page and see a bunch of English abbreviations: MACD, VOL, O.I, L.S Posit..(what I often use)
They are the true heartbeat and breath of the market
Today, I will introduce you to these 4 most practical indicators, not teaching you how to buy, but teaching you what the market is really thinking right now
1. MACD: The 'thermometer' of market momentum
- What is it:
MACD is a 'trend + momentum' dual indicator consisting of three lines:
- DIF (fast line): Reflects short-term trends
- DEA (slow line): Reflects long-term trends
- MACD Histogram: Shows the comparison of bullish and bearish forces
- It says:
> 'Is the market hot or cold now? Is it rising sharply or stalled?'
- How to use:
- Histogram changes from green to red → Longs begin to exert force
- Histogram changes from red to green → Shorts begin to dominate
- DIF and DEA cross → Possible trend reversal
2. O.I. (Open Interest): The 'deployment of forces' between longs and shorts
- What is it:
O.I. is the total of all open contracts, representing the total amount of funds being bet in the market.
- It says:
> How many people are buying up? How many are betting down? Who is holding firm?
- How to use:
- O.I. rising + price sideways → Stalemate between longs and shorts, about to explode
- O.I. falling + price dropping → Shorts dominate, trend may continue
- O.I. suddenly surges → Possible large funds entering the market
> Simple understanding: The higher the O.I., the more 'lively' the market is, but it is also riskier.
3. L.S Posit. (Long-Short Position Ratio): Who is holding the gun?
- What is it:
L.S Posit. shows the ratio of long (Long) and short (Short) positions.
- It says:
> Is it currently dominated by longs or shorts? Who is holding firm?
- How to use:
- Long position ratio >70% → Market overheated, beware of 'longs killing longs'
- Short position ratio >70% → Market panic, a rebound may occur
> Key reminder: When the long-short ratio is extreme, it is often a reversal signal. (The market is often long, and it is necessary to trace past records to confirm the usual long-short ratio of this currency.)
4. MA(5) / MA(10): The market's 'moving defense line'
- What is it:
MA is the moving average line, MA(5) is the 5-day average, MA(10) is the 10-day average.
- It says:
> Is the price pushing upwards or falling down? Is the trend established?
- How to use:
- Price above MA(5) and MA(5) > MA(10) → Trend upwards
- Price breaks below MA(5) and MA(5) < MA(10) → Trend downwards
- Price above the average line, go long; below, go short
> Simple rule: Moving averages act like 'moving support/resistance', helping you determine the trend direction.
My usage principles (for beginners)
1. First look at O.I. and L.S Posit. → Determine the comparison of long and short forces
2. Look at MACD again → Determine if momentum is exhausted
3. Finally look at MA and B/S → Confirm trends and turning points
When you know who is holding the longs and shorts, whether the momentum is exhausted, and whether the trend is established - you no longer need to guess, just follow.