Bybit Arbitrage is a trading tool that simplifies arbitrage trading by capitalizing on funding rate and price differences.

If you're seeking consistent returns with minimal risk, Bybit Arbitrage is the perfect ally.

 This robust tool empowers you to generate regular profits with minimal risks by capitalizing on price disparities across different markets. Its user-friendly interface lets you easily spot and exploit these differences, so that you can execute flawless arbitrage trading in the crypto market with confidence. Read on to learn how Bybit Arbitrage makes arbitrage trading an effortless way for you to achieve low-risk gains.

 is the buying and selling of the same or similar asset(s) at the same time across different markets to earn from slight price deviations. This act of purchasing an asset at a fixed price — while simultaneously selling it at a higher price — allows a trader to instantly make profits without any risks. 

While arbitrage trading has long been a staple in traditional financial markets, such as stock and forex, the advent of crypto trading has propelled arbitrage trading to new heights — thanks to the heightened volatility of the crypto market. Additionally, unlike traditional stock markets, crypto markets are traded 24/7, offering more opportunities for arbitrage traders to reap profits from the price gaps across exchanges and markets. 

 across exchanges or within a single exchange. Keep in mind that if you opt to arbitrage trade across different platforms, accessing your profits may prove to be complex, due to the need to transfer your assets between the exchanges, which can take up to several days to complete. On the other hand, arbitrage trading on a single platform is more straightforward — but more competitive as well.

There are multiple arbitrage trading strategies, but the most common ones in the crypto market include funding rates arbitrage, spot-futures arbitrage and futures arbitrage. 

Funding rates arbitrage allows traders to profit from variations in funding rates between 

 contracts. In contrast, spot-futures arbitrage enables traders to profit from price disparities between the spot and 

 for the same asset. Meanwhile, futures arbitrage involves profiting from price discrepancies between futures contracts with different expiration dates.

Bybit Arbitrage is a trading tool that helps traders identify arbitrage trading opportunities in two ways: funding rate and spread. 

The user-friendly interface organizes trading pairs based on either funding rates or spreads in different markets, so that traders can easily spot disparities in funding rate or price across the markets at a glance. 

Bybit Arbitrage is exclusively available to 

 mode. It facilitates arbitrage trading for USDT Perpetual, USDC Perpetual and USDC Futures contracts, thereby allowing you to enjoy arbitrage trading opportunities between USDT 

Spot pairs and USDT Perpetual pairs, or USDC Spot pairs and USDC Perpetual/Futures pairs. 

The Funding Rate Arbitrage feature exploits differences in funding rates between the Spot and Perpetual/Futures markets on the Bybit exchange. With the Funding Rate feature, traders can earn funding fees while simultaneously managing their positions in order to minimize potential losses and maximize gains through positive and negative arbitrage strategies.

Funding rates for the different trading pairs are listed in descending order. This helps traders to easily leverage the interest rate differential between Spot and Perpetual/Futures contracts.

The Funding Rate feature also allows you to 

 orders (with the same amount, but in different directions) in both Spot and Perpetual/Futures, which enables you to earn funding fees while mitigating potential losses (with potential gains).

holders in Futures/Perpetual contracts pay short position holders. You can leverage this situation by executing a positive arbitrage, which involves

 buying a Spot pair and taking a short position in 

Perpetual to earn steady funding fees. Alternatively, if the funding fee is negative, short position holders pay long position holders. In this case, you would perform a negative arbitrage by shorting a Spot pair and going long in a 

The Spread Arbitrage feature helps traders capitalize on price discrepancies between different markets for the same cryptocurrency asset. With this feature, you can easily compare the market prices of an asset traded across various trading pairs and contracts. While Spread Arbitrage may be similar to spot-futures arbitrage, it offers more arbitrage opportunities since it covers a broader range of markets, unlike spot-futures arbitrage, which targets specific markets

With Spread Arbitrage, the aim is to profit from the eventual price convergence as you buy the crypto asset at a lower price in one market (e.g., Spot) and sell it at a higher price in another market (e.g., Futures). 

As the futures price will eventually align with the Spot price when the contract expires, you’ll be able to take advantage of the simultaneous price disparity for the same asset.

In order to trade with Bybit Arbitrage, you’ll first need to 

. Currently, Bybit Arbitrage is exclusively accessible via the 

 for the web version, which will be launched soon!

Bybit Arbitrage offers multiple advantages.

Bybit Arbitrage is a powerful tool for traders seeking low-risk gains in the volatile crypto market. With its intuitive interface and exclusive features, traders can effectively leverage funding rate and price differences to maximize profits while minimizing risks. Bybit Arbitrage offers diverse benefits that make arbitrage trading more accessible and profitable than ever before.

Beginner

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How to Use Bybit Arbitrage to Achieve Funding Rate and Price Difference Arbitrage

Grayscale Investments has filed a registration statement on Form S-3 with the SEC to register shares of its Grayscale Ethereum Trust (ETHE) as part of efforts to uplist the trust to a spot Ethereum ETF on the NYSE Arca.

Daily Top Performer — Automata Network (ATA)

The SPX index is up 0.02%, investor focus on earnings and U.S. interest rates continues. The broader cryptocurrency market is down, with Bitcoin and Ether dropping by 3.78% and 2.41%, respectively in the past 24 hours.

Today’s outperformer is ATA, which jumped 8.9% after Automata launched Multi-Prover AVS on Eigenlayer Holesky Testnet to boost decentralized security.

Automata Network (ATA), founded in 2019, is a Web3 platform providing private web services for decentralized applications, focusing on secure, anonymous transactions and governance. Key features include a private voting system and MEV minimization to enhance user privacy and security. Automata's Multi-Prover AVS, which utilizes TEE Coprocessors to enhance security, is now available on the Eigenlayer Holesky testnet. This system employs the TEE Prover as a secondary security measure in decentralized systems. Operators, restakers, and developers are encouraged to learn more about this advancement on their website.

Check Out the Latest Prices, Charts, and Data of 

Grayscale Investments, the world's largest crypto asset manager, has filed a registration statement on Form S-3 with the SEC to register shares of its Grayscale Ethereum Trust (ETHE) as part of efforts to uplist the trust to a spot Ethereum ETF on the NYSE Arca. This filing follows NYSE Arca’s application and is a crucial step in the regulatory process required for offering shares continuously upon approval. The shares will not be sold until the registration is declared effective, and this offering is subject to the Securities Act of 1933. Grayscale emphasizes that the trust, not registered under the 1940 Act, involves high risk and volatility, is focused solely on Ethereum, and does not offer direct investment in Ethereum.

BlackRock's spot bitcoin ETF, IBIT, has significantly impacted the firm's overall ETF flows, comprising 24% of its total. Eric Balchunas, Bloomberg's Senior ETF Analyst, highlighted the fund's success during a panel on Hong Kong's newly approved spot crypto ETFs. Since its launch in January, IBIT has attracted consistent inflows for over 70 days, accumulating more than $18 billion in assets under management and becoming one of the most successful ETFs in history. The IBIT fund is second only to Grayscale's ETF in terms of assets but has seen remarkable trading volume along with other spot bitcoin ETFs, totaling nearly $230 billion.

Gamium, supported by Parachain Ventures, DAO Maker, and Mr. Beast among others, has its token $GMM listed on major exchanges with a fully diluted valuation of around $43M. The platform is promoting a beta points airdrop to reward early users, where participants can sign up and earn points through various activities like launching an MST, trading, daily logins, and referrals. Details on point earning and distribution are available in a dedicated blog post. However, potential users are cautioned to research due to the inherent risks associated with DeFi protocols and trading.

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Grayscale Files for SEC Registration to Convert Ethereum Trust into a Spot ETF on NYSE Arca

Sharky is a Solana-based lending and borrowing DeFi solution that utilizes NFTs as loan collateral.

Cryptocurrency lending and borrowing has always been a prominent niche of the decentralized finance (

) industry, championed by platforms like Aave (

). A much rarer variant of DeFi borrowing and lending is based on non-fungible tokens (

Sharky.fi, or simply Sharky, is a Solana-based lending and borrowing protocol that uses NFTs as collateral to facilitate the DeFi processes on the network. By putting up NFTs as collateral, users can borrow funds via short-term loans in Solana's native SOL tokens. For lenders, the platform is also a great way to earn high APY rates in just 7 to 14 days, while having their loaned funds protected by the NFTs.

Having established itself as the leader of NFT-based lending and borrowing on Solana, the Sharky project has ambitious plans to integrate two more highly popular crypto asset types — Ordinals and real-world assets (RWAs).

 (SHARK) is a lending and borrowing app on the 

 (SOL) blockchain that lets users provide NFTs as collateral to access short-term loans in SOL tokens.

 Lenders can view NFTs offered as collateral, and make loan offers secured by their preferred NFTs.

Although Sharky's public launch on the Solana mainnet dates back to April 2022, the platform operated without its 

, SHARK, for its first two years in the market. The SHARK token was eventually launched in mid-April 2024.

Using its innovative business concept, Sharky quickly established itself as the leader of NFT lending. According to the project’s team, Sharky has a 90% share of the NFT lending market on Solana and has issued more than 1.4 million NFT loans.

Following the recent launch of its SHARK token, the project aims to integrate additional crypto asset types in the future. These include 

 (RWAs). Another ambitious product type considered for future implementation on the platform is uncollateralized consumer loans.

As a lender on Sharky.fi, you can browse NFTs from a variety of collections offered on the platform and make a loan offer for potential borrowers. The collections available on Sharky include the platform's own 

 collection, Mad Labs, Solana Monkey Business (SMB), Tensorians, Namaste and more. Lenders’ offers are shown to potential borrowers on the platform, who then choose the best offer based on their borrowing needs.

The NFT provided by the borrower is used as collateral, and the lender makes their funds available in SOL tokens. Lenders earn interest on the funds, with the loan duration typically between 7 and 14 days. Interest rates, naturally, will vary depending upon on-platform activity. Usually, 

 for active loans range between 120% and 220%, though they can go up to 360%. As such, Sharky loans are an excellent way for lenders to earn some serious interest quickly. If a borrower fails to repay the loan in full, the NFT used as collateral is transferred to the lender.

For borrowers, the Sharky platform is an excellent opportunity to access SOL funds for short-term needs quickly and flexibly using their NFTs, rather than cryptocurrency, as collateral. The best part of the platform's borrowing mechanism is that you remain in possession of your NFT during the loan period as a borrower. While your NFT is used as collateral, its ownership isn't transferred to the lender while the loan is active. The ownership transfer may only happen at the end of the loan period if you fail to repay the loan in full.

Maintaining the ownership of your NFT allows you to keep using it on various DeFi and other apps for purposes such as staking or satisfying 

 eligibility requirements, among other potential uses.

Sharx is the platform's own NFT collection. One of the most popular collections used in Sharky's lending and borrowing operations, sharx is made up of 10,111 adorable shark characters. Purchasing a sharx NFT not only opens up borrowing opportunities but also entitles you to upgrade or boost your Chowder points, rewards that are used in Sharky's loyalty program. 

As a sharx holder, you're entitled to the airdrop of Sharky.fi’s governance token, SHARK, and you can also stake sharx to earn FISHY tokens.

The newly launched SHARK token is envisioned as the platform's governance asset, with a total supply of 100 million. As of the time of writing in late April 2024, only some specific details on the actual governance processes powered by SHARK are available. Thus, the token's actual use in on-platform governance is expected to be outlined in the future.

SHARK will be airdropped in two phases, with 4.25% set aside for the first phase and 3.5% for the second. Of the former, 70% is allocated to its community, with the remaining 30% is distributed to partner communities. Meanwhile, the second phase is held as a staking pool event with a lockup duration of 30 to 60 days exclusively for OG, new users and sharx holders.

 of Sharky. Unlike the brand-new SHARK token, FISHY was issued back in 2022 at the start of the platform's operations. FISHY can be earned by staking sharx NFTs, accumulating reward points and participating in Sharky's social media campaigns. The token can be used to boost sharx NFTs, which in turn can earn you additional Chowder points. FISHY also gives you access to NFT raffles and auctions held on Sharky.

The SHARK token can be bought on Bybit through a Spot pair with USDT (

). Additionally, you can also take part in Bybit's current campaigns for the token for the chance to grab a share of the 

, which includes a Token Splash event featuring 456,000 SHARK through Apr 30, 2024, 9AM UTC, and a Lucky Draw with 58,000 SHARK in rewards through Apr 30, 2024, 9:59AM UTC.

Lending and borrowing using NFTs as collateral is a novel concept that has earned Sharky leadership positions in this niche. As more platforms adopting this business model emerge, the competition in the field is likely to intensify. However, as of now, Sharky remains the absolute leader of the Solana-based NFT lending and borrowing market. 

As NFTs experience a resurgence in popularity following the post-2021 dip, DeFi solutions that make innovative use of these assets, such as Sharky, stand to benefit. Later in 2024 and beyond, we’ll likely hear more about NFTs being used as legitimate collateral in crypto finance — a new trend helped to no small degree by the Sharky platform.

Intermediate

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Sharky.fi (SHARK): The Decentralized Platform for Instant NFT Loans

Bybit Dual Asset Mining is a non-principal protected investment product with floating returns. Users who deposited crypto can earn an enhanced yield. Learn more.

Dual Asset is a short-term speculation vehicle that lets you capitalize on small price movements in the market. All you have to do is predict the direction of a given crypto asset, such as BTC, ETH or MNT, within a preset time frame. Upon maturity, your returns will be in the form of either USDT or your chosen crypto asset, depending on the outcome of your trade.

Bybit Dual Asset 2.0 is an enhanced version of the predecessor focusing on higher returns on capital for traders with better investment flexibility. Traders could customize their orders by entering different directions of the market trend based on their predictions to enjoy high-interest yields even if the predicted asset price did not trigger.  

Understanding Buy Low, Sell High on Bybit Dual Asset 2.0

 function on Bybit Dual Asset 2.0 refers to a product subscription in which traders anticipate the chosen digital asset to settle at a low targeted price at a predetermined time range. Here’s a user case scenario to help to visualize the product function: 

Alex chooses to buy BTC/USDT Dual Asset, and he will be using USDT as an underlying asset for the subscription to buy BTC at his desired lower crypto price. The yields vary depending on the settlement date, which ranges from 1 to 5 days. Assuming Alex opts for a 1-day subscription with 110% yields in APY, he is entitled to claim rewards in two different scenarios: 

 When the asset target price is reached  

, he will successfully purchase BTC at his desired price with his subscribed USDT and interest income.

His returns will be calculated with the formula provided below: 

 (Subscription Amount + Interest) / Target Price 

 Subscription Amount x APY x Subscription Period (in days)/365 

1,000 + ( 1,000 × 110% × 1/365) / 21,000 = 0.04776 BTC

Assuming the BTC price is $23,000 when cash out, Alex’s gross return on investment for the chosen Dual Asset subscription would be $1,098.48. 

 When the asset target price fails to reach  

, the target crypto will fail to be purchased, and you’ll receive your subscription amount and interest income in USDT.

Assuming the settlement price is higher than the target asset price, settling at $21,500. Alex’s return on investment will be calculated as below: 

1,000 + (1,000 × 110% × 1/365) = 1,003.0137 USDT

Even though Alex failed to purchase BTC at his desired price, he still earned rewards on his contributed USDT in the Dual Asset pool. It is still a win-win situation for Alex, as he did not lose any money for opportunity costs. 

: In both cases, Alex will still earn interest on his investment in the form of USDT. 

, in which traders anticipate selling the chosen digital assets at a higher targeted price within a predetermined date. Here’s a user case scenario to help to visualize the product function: 

Alex chooses to sell BTC/USDT Dual Asset, and he will be using USDT as an underlying asset for the subscription to sell BTC at his desired crypto price at a higher anticipated price. The yields vary depending on the settlement date, which ranges from 1 to 7 days. Assuming Alex opts for a 1-day subscription with 150% yields in APY, he is entitled to claim rewards in two different scenarios: 

 When the asset target price of $24,000 is reached  

, he will successfully sell his BTC at his desired price and receive USDT in return.

 (Subscription Amount + Interest) x Target Price

Assuming the settlement price is higher than the target asset price, settling at $24,000. Alex’s return on investment will be calculated as below: 

1 + (1 × 150% × 1/365) × 24,000 = $98.6301

Alex’s return on investment would be a total of 24,098.6301 USDT, including his capital of 24,000 USDT and the yields. 

 When the asset target price failed to reach, settling at $23,000. 

, he fails to sell his crypto at the target price and will receive yields in BTC as a return. 

When converting 1.0041 BTC to USDT at $23,00 per BTC, Alex will receive 23,094.30 USDT, including the yields. 

Why Should You Invest in Bybit Dual Asset?

Dual Asset might be a good fit for you if:

Bybit VIP users can unlock additional perks when investing in Bybit Dual Asset 2.0. These benefits include 

Bybit Dual Asset 2.0 leverage on sophisticated trading mechanics to allow product participants to earn high yields with greater flexibility. The subscribed assets will be deployed to Bybit Derivatives for hedging via a trusted third-party entity affiliated with Bybit. The yield generation process will not involve any on-chain activity. 

Participants will earn yields by capitalizing on the asset’s price movements by predicting the price direction of a crypto asset within a predetermined time frame. 

Bybit Dual Asset vs. Dual Asset 2.0: The Differences

Advanced

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What Is Bybit Dual Asset? (Updated 2024)

Trading

Indicators

New to trading and can't decide between leading vs. lagging indicators? Why not learn how to combine both indicators with our handy guide!

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Technical analysis is the science of adding indicators to crypto charts to determine trend strength and direction, and overbought or oversold readings. Many of the technical tools can be broken down into leading or lagging indicators. The leading indicators help predict trends, while the lagging indicators confirm the analysis. Wondering which is better when comparing leading vs. lagging indicators? Let’s review popular leading and lagging indicators and how, together, they become a powerful combination in any crypto trading plan.

Leading vs. Lagging Indicators: What Are They?

Before comparing leading vs. lagging indicators, it’s important to know how similar and different they are. Leading and lagging indicators are used in the technical analysis of price charts to predict and review the direction of price trends, potential reversal zones and target pricing for cryptocurrencies.

Both leading and lagging indicators are used by crypto traders, as each type serves a purpose. Leading indicators give you predictive hints on future movement and reversal points, while lagging indicators help you to identify and confirm trends.

Leading indicators are applied to a chart that uses past price data to forecast future price movements. These indicators “lead” the price because they anticipate movements and trends ahead of time. This helps crypto traders open or close their trades near the beginning of a new trend.

Support and resistance levels are some of the most important leading indicators. Support represents a “floor” below the current pricing, while resistance is the “ceiling” found above the current price.

When price corrects lower and approaches support, sellers stop selling and buyers begin to buy. This creates an imbalance in the marketplace, in which buyers overwhelm sellers and the market price rises. The opposite is true for resistance.

 often trend in an upward or downward direction, though they can be horizontal as well. Drawing a support trend line in an uptrend is pretty easy. Find the two or three lowest points of the uptrend, and draw an upward sloping line that connects at the low points of the uptrend. The low points should create a series of increasingly higher lows, giving the line an upward slant.

Support and resistance can be drawn and noted on the chart long before the price arrives, so that the trader can plan their trade or set alerts. In the support example above, we simply extend the line to the right, and as the price approaches, it becomes a buying signal. It truly is that easy — but more importantly, trend lines work!

Having a well-thought-out plan for your trade tends to lead to more stable results, rather than acting on emotion in the moment.

Lagging indicators are chart reading tools used by traders to analyze the market by using an average of previous prices. Rather than predict future market movements, they’re generally used to confirm the current trend and direction. Lagging indicators, as the name implies, lag the market so traders are more certain of the trend direction before they place a buy or sell order.

Relying on lagging indicators means the trader will miss out on the first portion of a new trend. Likewise, a trader will remain invested in the latter portion of an old trend when the beginning stages of a reversal have begun. Essentially, the lagging indicator gets you into the market later — and out of the market after it’s begun to reverse.

This is the price to pay for greater confirmation, and to some traders it’s worth it. Lagging indicators work really well when strong trends are in force. If the market isn’t trending, then lagging indicators provide little help, as the delay  in detecting a market reversal means entering at a worse price into a trend that doesn’t move.

As a result, a trader heavily reliant on lagging indicators will oftentimes miss major turning points and get whipsawed around in sideways trends. Ideally, instead of looking at it as leading vs. lagging indicators, traders will want to incorporate a mix of both into their trading plan.

Why Are Leading and Lagging Indicators Important to Technical Analysis? 

As both leading and lagging indicators have their benefits, it’s important to change that mindset of it being leading vs. lagging indicators. Leading indicators help you predict potential turning points before the price arrives. Using a leading indicator is similar to looking out the front window of your car while driving. It offers a view as to where you might be going.

Lagging indicators, on the other hand, are essentially an average of past price history, showing whether current trends are higher or lower than average. Using lagging indicators is like looking out of your rearview mirror to see where you’ve been. 

It’s important to note that relying solely on the signals of leading — or lagging — indicators will never produce 100% accuracy.

A leading indicator is a tool that’s added to the price chart to anticipate the future direction of the market. As a result, it allows traders to enter or exit the trend earlier, relative to waiting for additional confirmation from other tools.

Several leading indicators are available. The calculation behind each indicator is different, so they produce different, and sometimes conflicting, results.

Below are some examples of popular leading indicators.

If this was the first indicator you thought of when comparing 

 and extensions are hidden levels of support and resistance. These levels are “hidden” because they’re not obvious to the naked, untrained eye.

If you draw the Fibonacci retracement tool from the September 2020 low to the April 2021 high for Bitcoin, above, horizontal lines are produced at 23.6%, 38.2%, 61.8% and 78.6%.

These price zones represent potential levels of support in an upcoming correction. As you can see, during the summer of 2021, Bitcoin falls to the 38.2% Fibonacci retracement level on multiple occasions before rallying nearly 75%.

The Fibonacci retracement tool is a leading indicator because we can apply the tool to draw these support levels in April 2021, nearly five weeks ahead of the first touch of the 38.2% level! 

The Fibonacci extension is another tool that can anticipate turns in the market ahead of time by plotting how far a trend may extend.

In the Bitcoin chart above, the tool measures the length of the first wave from March 2020 to August 2020, then projects that distance from the September 2020 low. Essentially, since September 2020, a trader could view these levels as potential turning points. 

One of the projections produced in September 2020 when Bitcoin was trading near $10K was for the trend to extend, and then reverse near $69K in price. Bitcoin topped at $65K in April 2021.

 are another level of hidden support and resistance. Again, they’re “hidden” because the levels aren’t obvious to the naked eye. Pivot levels have been around for many years, and have stood the test of time for providing potential turning points in the market.

Pivot levels are calculated based on a period’s high, open, low and close prices. These four prices are run through a formula to calculate the output levels. The thinking behind the formula is that the prior period’s price movement will impact the next period’s turning points.

In the Ethereum chart above, we have weekly pivot points that are calculated at the beginning of the trading week. As trading begins on Sunday, you’ll often find prices bouncing and reacting near these pivot levels throughout the week.

As these price levels are created on Sunday, having only certain levels to focus on keeps the trader from getting distracted, and they can consider entering the market when the price reaches a pivot level.

On-balance volume (OBV) is a leading indicator that can offer insight into the direction of future trends. OBV was created to provide insight as to what the large “whale” investors are doing. If whales are buying, then OBV should be rising. If whales are selling, then OBV should fall.

“Whales” are the large money players within the crypto market, so understanding how they’re behaving helps predict the future price direction of the crypto. If price and OBV are diverging, that price behavior suggests a trend change may soon be at hand.

In the Ethereum chart above, the rally in September 2021 doesn’t have the supporting volume. The market’s price rallies to a new recent high while OBV is below its starting point. This means there’s a small  volume on the rally, and the market is at risk of falling.

Sure enough, Ethereum ends up falling about 25% over the next week on increasing down volume.

A lagging indicator is a tool used by traders to analyze the market using averages of previous price data. As these calculations are a variety of moving averages, they tend to react more slowly to the market’s movements.

While this might be a reason why some traders prefer using Pivot Points and OBV when comparing leading vs. lagging indicators, this time delay can be used in your favor. Slower reaction time helps the trader capture the essence of the larger trends, and can be a confirmation signal to the trend change.

Let’s review some popular lagging indicators.

Contrary to popular belief when comparing leading vs. lagging indicators, the 

 is a lagging indicator. As one of the most popular oscillators for traders, the RSI provides a measure of internal strength. When the RSI becomes oversold and the indicator dips below 30, then the market is ripe for a bullish reversal. If the RSI becomes overbought and the indicator rises above 70, then the market is at risk of correcting lower.

In July 2021, Bitcoin had been entrenched in a large correction. This downtrend meant that opportunities to sell short would be the higher probability trades. Sell trade signals would appear when the RSI was overbought, with the RSI indicator crossing back below the 70 level.

There were several sell signals generated during July that would have helped a trader enter into the downtrend. Not every signal is always 100% accurate. However, the signals tend to be a little more reliable than a leading indicator because lagging indicators have the benefit of averaging in the longer trends.

Simple moving average (SMA) is extremely popular and widely used. SMA is a versatile tool, commonly used to determine trend direction.

 is just as its name implies: a simple average of the prices covering a certain number of previous periods. A 200-period SMA would be an average price over the previous 200 periods. Therefore, if the current price is trading above the moving average, then the current trend is considered higher relative to the previous trend.

Looking at the Bitcoin chart above, from May 2021 through July 2021 Bitcoin was generally trading below the 200-period simple moving average. This implies the trend was lower, and the trader was wise to consider sell positions.

Then, Bitcoin began to rally in late July, breaking above the SMA. At that point, Bitcoin was flashing buy signals.

The benefit of using moving averages is that you can easily determine the direction of the longer trends. However, the signals will be delayed, as it took four days from the bottom on July 20 before the buy signal from the moving average was generated.

 are an indicator which factors in volatility. The calculation involves a moving average surrounded by a volatility gauge. When the markets become volatile, Bollinger Bands adjust by widening their scope to accommodate greater price movements. When the markets become stale, the volatility gauge adjusts inward.

The outer limits of the Bollinger Bands can be seen as support and resistance levels. The idea is that the market may stray from the middle only as far as the outer bands, then eventually retrace back to the moving average.

On the Ethereum 4-hour chart above, we have Bollinger Bands added to a 100-period moving average. When Ethereum falls toward the lower band, this can be seen as a buy signal. The subsequent sell signal is generated when the price rallies to the upper band.

How to Combine Leading and Lagging Indicators

Now that you understand the differences when looking at leading vs. lagging indicators and understand both have useful qualities, it’s time to combine both of them. A powerful strategy which crypto traders implement is using leading indicators to establish a price zone of interest, then allowing the lagging indicator to confirm the trade.

This type of combination allows traders to see potential reversal zones in advance of the market arriving. This affords the trader the ability to use the lagging indicator to trigger the entry signal.

As a leading indicator, the convergence or divergence of OBV with price can indicate whether the current trend is strong and likely to continue — or tired and about to reverse. When the SMA is aligned with OBV, the combination can generate a powerful and quick trend.

On the Ethereum chart above, OBV starts to break lower before the price breaks the equivalent support zone. This early breakdown of OBV hints that large volumes are being sold and are likely to push market prices lower.

Now that we’ve a suggested trend (lower in this example), the trader can then check that trend against a simple moving average. At the time of the breakdown in OBV, the price is trading below the 200-period simple moving average. Therefore, as a lagging indicator, the SMA is confirming the trend is lower.

Taken together, the leading indicator is suggesting new lows while the lagging indicator shows a downtrend. Ethereum did in fact undergo a sell-off over the next several days.

As mentioned, the Fibonacci tools provide hidden levels of support and resistance. Once these levels are determined in advance, look for the RSI to become overbought or oversold for the trigger signal. By waiting on the lagging indicator to appear, the chance of a false signal is greatly reduced.

Let’s go back to our previously noted Fibonacci extension example. Months in advance, we can identify the $69K area for Bitcoin as a potential reversal zone. As Bitcoin approaches the $69K resistance area, look for overbought signals to appear on the RSI.

On April 14, the day of the high for Bitcoin, the RSI indicator flashes a Bitcoin sell signal after being overbought. This combination of leading and lagging indicators leads to a quick 50% collapse in pricing.

Since pivot points are a leading indicator and are calculated in advance, a powerful combination is created when the RSI indicator is brought in to confirm a reaction that a crypto market is making at a pivot point.

Above, you can see weekly pivot points (a leading indicator) that are calculated on Sunday for the full trading week.

Entering from above, Ethereum prices reach the weekly pivot point on Tuesday, August 3, 2021. At the same time, the RSI (a lagging indicator) reaches into oversold territory below 30. When the RSI crosses back above 30, it confirms a bullish trade.

Leading vs. lagging indicators: which is best? Ultimately, leading indicators are best for identifying potential price reversal zones or trend strength before the market arrives. Conversely, lagging indicators are used for confirming the direction of trends or overbought and oversold levels.

A combination of the two can lead to more informed trading decisions as the trader receives the benefit of prediction joined with the strength of confirmation.

Leading vs. Lagging Indicators: Can They Help Time Your Entry and Exit?

Grab Up to 5,000 USDT in Rewards

Grab Up to 5,000 USDT in Rewards