In this article we are going to explore how to use indicators, in this case, moving averages, to trade.

They can be used to trade any currency from $BTC to $PEPE or $DOGS

What are they?

  • A moving average is a measure of change that tracks the past price of an asset and evaluates the history of market movements to calculate possible future patterns. A moving average is primarily a lagging indicator, making it one of the most popular tools in technical analysis.

Within moving averages there are 2 types: simple and exponential.

The simple moving average calculates the average price of an asset over a specified number of periods by adding up the closing prices and dividing the result by the number of periods. The exponential moving average is similar, but assigns more weight to recent prices, making it more sensitive to variations in the market.

The most commonly used is the exponential, in the following periods: 20-55-100 and 200. Although some choose to use only 20-55-200.

As they are based on the closing of candles (periods), the data are retrospective, not projective. They are lines where we visualize a "smoothed" price, ignoring highs and lows.

How to use:

We are going to present the 3 simplest and most commonly used ways to use them.

  • Reference

In this case, the most important average is the 200-period average. It tells us what the current trend is.

If the price is below this average, it is a bearish trend, so we operate Short. When it is above it, it is bullish and we look for longs.

Here is an example of #BTC in 4 hours

As you can see, starting from the 200 EMA, all the others and the price are below. So in 4 hours we are bearish and we must prioritize sales.

At what times? Well, let's see.

  • Interaction

Interacting with the EMA means identifying "what happens" when price touches it.

In the previous example we saw that the trend is bearish, and if we look closely, the 20 EMA (yellow) is the one that interacts the most.

When the price reaches it and fails to overcome it, there is a fall. On the other hand, when it exceeds it, there is a rise.

If we want to identify a trend change, we must pay attention to this: When the price breaks the EMA and "supports" itself, that is, it does not fall, we call it riding the EMA, which marks the floor.

On the other hand, if it reaches a higher EMA and bounces, there is a rejection, a lack of strength and liquidity. It is a bounce to continue falling. That is what the 50-55 EMA is for, it is the pivot point, the first EMA that the price looks for and where it interacts.

For #DOGS✅ we use the 1H chart. As it has little history, there are only large EMAs in small time frames, but the example is useful.

Every time it goes above the 20 EMA, it looks for the 50 EMA and is rejected.

But we know several things:

  1. The 50 EMA is a good entry point

  2. The trend is bearish by the order of EMA's

  3. The ideal is to look for shorts.

  • Cruces

A crossover of EMAs, especially on long time frames, announces a strong movement or change in trend.

Un golden Cross o death Cross.

If in these examples the 20 EMA manages to get above the 50 EMA, it would mean that the price is changing trend. The same happens if the 50 EMA gets above the 200 EMA. That is a golden cross.

A death cross starts with the 20 EMA falling below the higher EMA, then the 50 EMA falls below the 100 or 200 EMA respectively, lining up in a bearish TT. Such crossovers are called death crosses.

Both crosses are a kind of sign.

BTC on a daily timeframe is showing signs of a possible death cross, with the 20 EMA falling and the others curving. The 50 EMA is below the 100 EMA, a bad sign. And the price is below the 200 EMA, touching it and being rejected.

In summary, EMAs generally mark the current trend, serve as a reference and act as DYNAMIC SUPPORTS AND RESISTANCES, unlike liquidity or Fibo levels, based on another analysis, these are dynamic.

Conclusions:

The 20 EMA is the one that interacts the most, since it is the lowest, while the 50-55 EMA is usually the first target, both on the upside and on the downside.

The position of the price above or below the EMAs gives us a general overview and guidance for action.

We must see how the price behaves in the chosen time frame and with the selected EMAs, if we detect a behavior pattern we can make a decision.

This article is for educational purposes, using current examples to illustrate. It does not constitute investment advice.

It is up to the reader to choose how to use this information.

If you liked it, leave a like and follow me for future publications where we will continue advancing in the different analyses.

PS: My intention was to put an image of each graph to illustrate, but due to some error it does not allow me to add more than 1. Apologies for that.

Crypto Citizen says goodbye. I wish you a great day and thank you for your support.