In virtual currency contract trading, the moving average system is a rather important technical analysis tool, which I believe all traders have experienced. It can provide references for our trading in many aspects, such as judging trends, finding support and resistance levels, and determining buy and sell timing.
Among the many moving averages, we have short-term, medium-term, long-term, and ultra-long-term classifications, generally 5-day, 10-day, 20-day, and 30-day. The 5-day moving average belongs to the short-term moving averages and reacts sensitively to the short-term trend of virtual currency prices. When the price crosses above the 5-day moving average, it often indicates an upward short-term trend, at which point traders may consider buying; conversely, if the price crosses below the 5-day moving average, the short-term trend is downward, and considering selling is more prudent.
The 10-day moving average is the medium-term moving average, reflecting the medium-term trend. When the price crosses above the 10-day moving average, the medium-term trend is upward, and increasing positions can be considered; when the price crosses below the 10-day moving average, the medium-term trend is downward, and reducing positions may be necessary.
Similarly, the 20-day moving average is a long-term moving average. When the price crosses above, the long-term trend is upward; when the price crosses below, the long-term trend is downward. The 30-day, 60-day, 120-day, and 250-day moving averages are also ultra-long-term moving averages that follow the same pattern.
The practical value of the moving average system is primarily reflected in determining buy and sell timing. The information indicated by the price crossing above or below the moving average should be used flexibly. The strength and speed of the breakout, as well as the corresponding time length of the moving average and its other indicators, are important information. As I mentioned earlier, no analysis method exists in isolation; it must be combined with other factors for comprehensive judgment.
In the complex and ever-changing environment of the cryptocurrency space, relying solely on the moving average system or any other technical analysis tool is not sufficiently cautious. For example, I once had a junior who only looked at one indicator and blindly opened positions using just that indicator, without considering the overall market conditions, news, and other factors. While most trends may align with the calculated results, there are always exceptions, and this junior has since exited the market. In short, we need to take a comprehensive view of various factors in trading and make decisions cautiously.