What is a sliding average and how it is used for cryptocurrencies?
MA is one of the easiest ones in application and therefore popular indicators for technical analysis. Depending on the goals and trade strategy, various types of sliding average are used:
- Simple sliding average (Simple Moving Average, SMA) is calculated as the arithmetic mean of individual periods (minutes, hours, days, and so on) for the selected period of time. For example, to calculate 100-SMA on an hourly graph, the indicator takes the value of the price of each individual hour, summarizes the 100 previous values and divides by 100. For 20-SMA-summarizes 20 previous values and divides by 20.
- The exponential sliding medium (Exponential Moving Average, EMA) is more sensitive to a change in price. It is calculated as SMA, but puts in the priority of the nearby periods of data, and not those that are in the “tail” of the period. EMA are used to evaluate the front of the curve due to its priority with fresh data.
- The smoothed sliding medium (Smooth Moving Average, SMMA) “gives” more weight data in the tail of the calculation period and much less weight for close values. Due to this, the SMMA indicator is not so sensitive to impulses and smooths the front of the curve, paying more attention to the general trend.
- Line-enacted sliding medium (Linear Weighted Moving Average, Lwma) first of all takes into account fresh values and reduces the importance of data linearly to the tail. Lwma is more sensitive to fresh data than EMA.
How to use a sliding average?
All sliding medium -sized mediums have their own arguments and are adjusted individually depending on the trading strategy, time of time, tools and other conditions. Having equal periods of settings, each sliding will behave unique.
As shown in the figure, the sliding SMA, EMA and SMMA have the same length of 200 days, but behave differently.
In addition to determining the general trend, traders use an MA indocator to calculate the levels of possible support and resistance. The intersection of sliding can also signal the strength or continuation of the trend.
For example, finding a price below a 200-day sliding average can signal a strong bear trend. In the example of a price below 50-day sliding-a short-term descending trend. Когда цена актива находится выше 200-дневной скользящей и одновременно выше 50-дневной — это сильный бычий тренд.
What MA is used in the cryptocurrency market?
To determine long -term trends, the most common periods of 50, 100, 150, 200 and 250 days are most common. For short -term movements – gaps of 5, 10, 20 and 50 days.
The establishment of periods is associated with the number of trade days on the exchange, excluding weekends and holidays. Thus, in the example with a 50-day sliding average we are talking about ten exchange weeks, and with 200-day MA-about 40 weeks. The smallest period of 5 days indicates one week of the exchange work.
Despite the fact that there are no weekends and holidays in the crypto, to analyze the prices for digital assets adopted tools from the traditional financial market. For this reason, when trading cryptocurrencies, the same periods are used: 50, 100, 150, 200 and 250 days.
The most used indicators in the cryptocurrency market https://gagarin.news/news/the-british-government-is-ready-to-protect-cryptocurrency/ is considered to be 50- and 200-day sliding.
What is the golden cross and the cross of death?
Among the traders, the Patterns of the Golden Cross and the Cross of Death are often mentioned – one of the most common figures of the intersection of medium sliding.
The Golden Cross is a situation when a short-term (50-day) sliding crosses up a long-term (200-day) sliding, which is considered a bull pattern.
In turn, the cross of death is a bearish pattern, which involves the intersection of a short-term (50-day) sliding down under a long-term sliding (200-day) average.
The widespread and popularity of the above patterns do not give any guarantee of success – it is worth evaluating risks and prospects only in conjunction with many other factors.
What are the advantages and disadvantages of a sliding average?
On the one hand, all MA greatly facilitate the definition of short -term and long -term trends. Smoothing the price volatility of the asset allows you to easily see the direction of movement of the instrument price.
Other advantages of the use of sliding medium are simplicity in the process of configuration and use, plus the visibility of the displayed data.