TYSlearn: How to use Moving Averages in Crypto Trading
One of the major trends in the last decade, it looks as if Crypto Trading is the new thing and will continue to grow as more and more people get into it. With the addition of new Cryptocurrencies and features in the industry, it won’t be long before it takes over traditional financial methods and although some claim it might be too late to invest in Crypto since Bitcoin is now worth more than $11k and is not attainable, we say that the revolution has just begun. Keeping that in mind, we believe that Crypto trading should be fair game for everyone and we are here to help make things easier for the newbies out there. If you are interested in learning about Cryptocurrency trading and want to know all the details, follow us on our socials for weekly updates on tips and tricks of crypto trading. In this week’s blog, we will look at Moving Averages and how they aid traders in making the right calls.
The basic traders might be using candlestick or bar graphs to determine the trend and that is good for the short term but it will definitely be a little hard to determine the overall trend from the lines of a specific Cryptocurrency. Being reliable and easy to understand, moving averages give us the breakdown in performance of the specific Crypto against time. In simpler terms, you are given a line against time starting from where the value was and where it’s trend will be. The closing values over the last couple of days will be noted and then divided by the number of days will be written to give a clear estimate on its performance. Let’s take the example of a month. You note down the closing prices for BTC/USDT every day for a month, add them together and then divide by the number of days. That is simply how it works. Let’s now move on to the common types of moving averages that are there and their importance for Crypto Traders.
50 Day Moving Average
This type of moving average is usually used for its short term market confidence. The basic visual example would be as follows.
As you can see with the 50 day moving average depicted in red, it corresponds to the closing prices of BTC/USDT. When it comes down to analyzing it, any time the line falls below the price action, it means that there is a short time bull market. Similarly, if the price action is below the red line, it will be a short time bear market. As we can see with the recent BTC performance, it has been bullish with its rise towards $11.3k from $10.6k. What’s good about the short term moving average is that it is sensitive towards high value rises or drops. As we can clearly see in the three high candle formations in the above graphs, the trend line starts moving forward.
100 day Moving Average
A longer version of the 50 day moving average, it is considered a medium term momentum indicator. Following the same kind of mechanism as the 50 day, if the price action is below the 100 day moving average line, it will indicate a long term bear market and if it is above, then bullish. Not many people use the 100 day moving average as compared to the 50 day or 200 day moving average. The reason being that most traders believe it to be advantageous to use the 50 for short and the 200 for the long term cryptocurrency holding.
200 day Moving Average
After reading the 50 day and 100 day moving averages above, it does not take a super genius to figure out what a 200 day moving average would be. It basically denotes the same thing except done on a 200 day period. It will give the trader a big picture of how a particular market is doing and if the trader should invest in holding a crypto for long term rather than just placing orders which the 50 day line is mostly used for.
With the 200 day Moving Average line denoted in blue, we can clearly see that BTC has a good long term trend and those traders that held it found their coins increasing in value. Reiterating the fact that those traders that are keen to hold rather than trade everyday use the 200 day Moving Average line, it usually plays out very well for them.
Exponential Moving Averages
You might have heard the term EMA used in discussions about Crypto Trading and that is because it is another widely used trading tool that a lot of people use. With the 50,100 & 200 day Moving Averages, each day was given equal weightage on the price value. However, with the exponential Moving Average, the recent most days are given more importance making it suitable for short term traders looking to enter or exit a market based on the circumstances. Since it’s much faster than the simple moving averages, it gives you a quicker indication of whether to buy or sell. The main advantage of this system being its speed on reacting to price changes.
Alongside these approaches, another indicator that is quite frequently used is the golden cross when a short term moving average crosses a long term moving average. When such a scenario happens, it usually means that a bearish or bullish trend is nearby. Moving averages is one of the simpler methods a trader can use to ensure he or she has a plan but it is an effective one. Depending on the time window you choose, you can use it for day trading, or long term trading as well. Alongside other tools, it usually guarantees that traders make a profit on most of their orders. Although this is not 100% confirmed, it still is a pretty good thing to learn for a Crypto Trader especially if you are just getting started in this vast universe. Don’t take this as financial advice, do your own research on top of this article and make sure to practice loads on exchanges to grow your portfolio.
Interested in starting now, do explore Tyslin Exchange where all the graphs are integrated and can give you information on all moving averages based on your preference for a wide variety of cryptocurrencies. Until next time, Good Luck and we hope that you excel!
