July 10, 2020

Top 3 Best MA (Moving Average) Trading Strategies

Although trading can be one of the best ways to increase your capital, we must remember that it is a risky practice and requires a plan / strategy to work. Unfortunately, unplanned trades are almost certainly destined to fail, and considering that failing in this world results in losing money, we can’t afford that.

The Moving Averages (MA) are technical trend indicators, drawn based on calculations / averages after analyzing a series of data regarding the supply and demand processes in the markets.

By being able to detect the course of a trend, moving averages allow us to project a price path and position inputs at key points for profit. This indicator, like all others, must be correctly executed to act on the market.

Moving Average types

Simple Moving Average (SMA)

The simple moving average is an unweighted moving average. This means that each day in the dataset is equally important and weighted equally. As each new day ends, the oldest data point is discarded and the newest data point is added at the beginning.

Exponential Moving Average (EMA)

The main difference from EMA is that old data points never go below average. That is, the old data points retain a multiplier even if they are outside the length of the selected data series.

The EMA calculation favors the most recent prices, since it gives them a higher weight. Which is significantly reduced as prices move away in time.

10-25-20 EMA Strategy

  • When the MA 10 crosses paths with the MA 25 and continues through the MA 50, a long / short signal is generated in the direction the MA 10 is moving.
  • For example, if the indicator is moving down and crosses the other two indicators (MA 25 and MA 50) from top to bottom, a short signal is generated.
  • If the indicator is moving from the bottom up and crosses the indicators from the bottom up, it would be generating a long signal.
  • Always wait for the current candle to complete to confirm the signal, in order to avoid false alarms.

6-18 EMA Strategy

  • First, we must access the indicators menu and add two moving averages: 6 and 18.
  • To determine an uptrend and position a long order, we must wait for EMA 6 to go above EMA 18 at a key point (by failing to break a support, for example).
  • Greater maximums and greater minimums are formed.
  • Normal and parallel distance between EMA 6 and EMA 18 in an upward direction.
  • EMA 18 above EMA 6 indicates possible short entry.

9-14 Strategy

  • Add a 9-period EMA and and change its color to red (or any other color) for easy identification. This line constitutes the fast moving average.
  • Add another 14-period exponential moving average and applied to the close to the chart and change its color to blue (optional) for easy identification. This line constitutes the slow moving average.
  • Consider placing a long position when the fast EMA crosses the slow EMA from bottom to top.
  • Consider placing a short position when the fast EMA crosses the slow EMA from top to bottom.
  • In both cases the entry point is at the opening of the next candle after the crossing occurs.

Importantly, when entering trading, many cryptocurrency traders employ moving averages tools for multiple purposes, based on their stated goals. However, it is important to highlight that when making decisions to make an investment, EMAs are variable tools that must be used and combined with other instruments. In order to look for a greater probability of success in the operations carried out.

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