Gaussian Channel Indicator: Detailed overview for crypto investors
14 Mar, 2023
Trading is based on numerous indicators and different types of market analysis. It may be challenging to follow them, especially for beginners. However, one cannot rely only on his own feelings and thoughts in this area. You definitely need some set of instruments that will help you to navigate and make decisions. It is recommended to get acquainted with the market and its instruments step by step and then build up your strategy on this knowledge. For instance, here we are going to discuss Gaussian Channel Indicator, its’ meaning and utilization.
What Is the Gaussian Channel Indicator?
A talented mathematician Carl Gauss developed one of the most popular statistical tools that we know as the normal distribution. Nowadays it is often referred to as a bell curve that has mean and variance parameters and is used in the financial and cryptocurrency market. As a technical indicator, it minimized the lag and helps to make a correct prediction of future trends.
That is exactly the thing that one needs for successful transactions. From a mathematical point of view, this concept is based on the following: • The mean value is put in the center of the curve; • The standard deviations determine dispersion around it; • Under normal conditions, 68% of information is between -1 and +1 standard deviations, 95% fall is within two, and 99.7% is within three standard deviations. In special software, this indicator has three bands: center, high and low. When the price appears in the channel from the top or the bottom, it means that it can change abruptly. If it happens you will also observe the change in colors on the curve. Therefore, while following the changes in this indicator, you can better understand what the current trends are and build up your strategy correspondingly. The conclusions that you make will help you to choose the time to visit an Exolix exchange and convert your coins profitably.
How to Use the Gaussian Channel Indicator
What are the ways of the utilization of this indicator? Imagine that one is bullish on Bitcoin. Then, it is recommended to wait for the moment when the price appears on this channel. It indicates a probable reversal of the trend. When the price goes to the upper band, a bullish trend starts. In addition, you can follow the change of color for this indicator (it can be green or red). It is a bit easy and the probability of false alerts is eliminated. However, it is related to some delay in the time when you enter the market. One point that is also important is to choose an entry point according to the risk level that is suitable for you. Some users initiate trades in the middle band, while others follow additional indicators and try to get the clearest possible picture before they swap something.
Advantages and disadvantages of Gaussian channel trading
Price movements and volatility accompany the life of every trader. One cannot avoid them and has to select the strategy and indicators to cope with the high level of uncertainty.
For this, the proper scope of indicators that are used correctly is the best thing. As for the normal distribution, its benefits are as follows:
• It is based on a mathematical concept that was thoroughly studied and described in detail; • This tool has proved its ability to indicate future trends; • It is easy to understand and use it. Whenever you observe the green color, it is time to buy, and vice versa. However, there are certain drawbacks that one should pay attention to, namely: • It is a reliable tool for long-term strategies. In the brief period, the price can go over the channel, so an entry will be delayed; • Sometimes you will need to utilize additional indicators to confirm the trend that you observe here; • Not every trading software provides a chance to use this tool. Sometimes it must be downloaded from other resources that make the whole process a little bit more difficult. Furthermore, it is advisable to check the following parameters for any indicator that you are going to use: • First of all, such a tool must offer more correct than incorrect signals. If your predictions are right, you will profit, and you can achieve this with reliable indicators. Therefore, look for the opinions and advice of other traders; • Do not forget to check the profit-to-loss ratio. The higher it is, the better your results will be. Thus, a proper indicator is related to many right signals that prevail over the incorrect ones and is at least two times more profitable than losing. If we consider the Gaussian channel indicator in these terms, we will observe quite high reliability. For instance, it was successfully used for the prediction of Bitcoin’s price in 2020 when the volatility was extremely high. It provided clear trends that appeared to be true and may users profit from it. Altogether, this tool belongs to the group of basic indicators. It is backed by science and has proven its reliability during different periods on the market. Do not hesitate to add it to your instruments and profit from it. Just take your time and follow it for some period to keep up with all the nuances and features. Keep in mind that correct signals help to build up your strategy and support you on the way toward success and profits.