How to use the divergence indicator? Master this set of buy and sell signals to help you avoid pitfalls

What is the Bias Rate, and Why Are Traders Using It?

The Bias Rate (BIAS) is a commonly used tool in technical analysis, essentially showing the deviation of the current price from the moving average line in percentage terms. Simply put, it reflects how “out of line” the price is — how far it has moved away from the moving average.

A real-world example: In the crypto world, it’s common to see a coin surge by 50% in a short period. At this point, retail investors start panic selling, worried that the high point has passed. Meanwhile, some see the price dropping sharply and begin bottom-fishing. The logic behind these extreme behaviors can be quantified using the Bias Rate indicator.

The core function of the Bias Rate is to capture excessive price fluctuations and detect reversal signals in advance. When the price deviates too far from the moving average, the force pulling it back tends to be stronger.

How to Calculate the Bias Rate? A Simple Formula

The calculation method is actually straightforward:

N-day Bias Rate = (( Closing Price of the Day - N-day Moving Average Price) / N-day Moving Average Price × 100

The key is understanding the N-day moving average — which is the average of the past N days’ prices. For example, a 5-day moving average is the average price over the most recent 5 days; a 10-day moving average is over the most recent 10 days.

Bias rates for different periods serve different purposes. Short periods (5-day, 6-day) react quickly but can generate noise; longer periods (30-day, 60-day) are more stable but respond more slowly. Most traders look at multiple periods simultaneously for a comprehensive judgment.

How to Understand Positive and Negative Bias? This is the core

• Positive Bias = Price above the moving average, indicating an uptrend. The larger the positive value, the greater the short-term increase, more profit-taking, and increased selling pressure.
• Negative Bias = Price below the moving average, indicating a downtrend. The larger the negative value, the bigger the decline, potentially better bottom-fishing opportunities, and stronger short-covering willingness.

In simple terms: Too large a positive bias → someone is taking profits; too large a negative bias → someone is absorbing the sell-off.

How to Use Bias Rate to Find Buy and Sell Points? Practical Standards Are Here

This is what everyone cares about most. Based on market strength or weakness, set different alert thresholds:

In a Weak Market:

• Bias ≥ +5 → Overbought signal, consider selling or reducing positions
• Bias ≤ -5 → Oversold signal, consider buying or increasing positions

In a Strong Market:

• Bias ≥ +10 → Overbought signal, consider exiting appropriately
• Bias ≤ -10 → Oversold signal, consider entering on dips

Key point: These numbers are not absolute buy/sell signals but reference values. They should be combined with price trends, volume, and other indicators for comprehensive analysis.

How to Set Bias Rate for Practical Use?

Using the Bias Rate on trading platforms is simple:

1. Open the candlestick chart, select “Bias” or “BIAS” in the technical indicators section.
2. The system usually defaults to common parameters like 5-day, 10-day, 24-day.
3. If needed, customize by modifying parameters in the indicator settings.

Recommended approach:

• First, run with default parameters for a period to familiarize yourself with the indicator’s nature.
• Then, adjust parameters based on your traded assets and timeframes.
• Set price alert functions to notify you when Bias exceeds thresholds.

You Need to Know the Pitfalls of Bias Rate

Never treat the Bias Rate as a万能工具 (all-in-one tool):

1. Lagging Issue: Since Bias is based on moving averages, which are inherently lagging, it may not react promptly during rapid surges or drops.
2. Useless in Sideways Markets: When prices oscillate within a range, Bias fluctuates up and down, generating many false signals.
3. Market Cap Discrepancies: Larger-cap coins tend to have more accurate Bias readings; small-cap coins can be manipulated, rendering the indicator less reliable.

Proper Use of Bias Rate: Be Professional Like This

1. Must be combined with other indicators. Relying solely on Bias can trap you. Common combinations include:

   • KD indicator (to verify overbought/oversold)
   • MACD (to confirm trend direction)
   • Bollinger Bands (to assist in judging volatility)

2. Parameter selection is crucial. Too short a period may lead to overtrading; too long may cause missed opportunities. Choose based on your trading cycle — parameters for 5-minute charts differ from daily charts.

3. Combine with fundamental analysis. Good projects tend to rebound quickly when oversold; poor projects may continue to decline. Don’t rely solely on technical indicators.

4. Set stop-loss and take-profit levels. Even if Bias signals a reversal, always have risk management in place. Don’t go all-in betting on a reversal.

In summary: Bias Rate is a useful auxiliary tool but not a magic bullet. Combining it with other analysis methods will improve your trading success rate.