Steemit Crypto Academy – Season 3 - Week 5 - Post for @lenonmc21

Question 1 – Define in your own words what are simple moving averages and exponential moving averages

When it comes to technical analysis of any cryptocurrency asset over a period of time, moving averages are very beneficial when it comes to analyzing price actions over a fixed period of time. Like the name, a moving average basically represents the average closing price of any selected cryptocurrency asset over a fixed period of time. As far as moving average is concerned, there are two common moving averages used by many traders and technical analysts when it comes to technical analysis of any cryptocurrency asset; the simple moving average known in short as SMA and the exponential moving average known in short as EMA. Both the SMA and the EMA are commonly used by a lot of traders, however, each moving average has its own area of strength hence why a certain type of traders make use of one or the other depending on the trading situation. While both the simple moving average and the exponential moving average are both moving average indicators, they are slightly different in the way they work.

Simple moving average

A simple moving average is basically a type of moving average technical indicator that calculates the average price of any cryptocurrency asset pair over a period of time period. The simple moving average indicator has shown to be a really effective indicator for determining trend direction. The way this works is that if the simple moving average is moving up, it indicates that there is an upward price movement. If the simple moving average is moving down, it indicates that there is a downward price movement.

When it comes to the simple moving average, the most common period is the 200 periods simple average for calculating the long term average price of any cryptocurrency asset. This is great for determining long term trends. A simple average indicator creates a smoother line when averaging long term prices over a period of time. The simple moving average is also a great indicator for signalling entry and exit points. The way this works is that when the simple average is below the price, it is an entry signal and when the simple moving average is above the price, it is an exit signal.

Exponential moving average

An exponential moving average is basically a type of moving average technical indicator that is very similar to the simple moving average but with its own differences. An exponential moving average is simply a moving that gives more weight to the current price based on a particular time period. The exponential moving average indicator is more sensitive to current price movement and has shown to be a really effective way for determining trend direction early and is great for the short term.

When it comes to the exponential moving average, short term time periods are most common. The exponential moving average is a great indicator for signalling entry and exit points as well. when the exponential moving average is moving up, it is an entry signal and when the simple moving average moves down, it is an exit signal. Also, the exponential moving average is great for determining support and resistance areas. The way this works is that, when the exponential moving average line is rising, it creates the support area, and when the exponential moving average is falling, it creates the resistance area.

Question 2 - Explain how simple and exponential moving averages are calculated

Calculating simple moving average

The simple moving average basically calculates the average price of any cryptocurrency asset pair over a period of time period. The calculation is done by doing the addition of the closing prices of the selected cryptocurrency asset over a period of time, and diving the result by the number of the periods. For instance, if a 100 day simple moving average is chosen, the simple moving average will add the closing prices of the cryptocurrency asset of the 100 day and divide the result by 100.

Simple moving average = ( Sum of all prices on a N ) / N
N is the period of time

Calculating exponential moving average

Exponential moving average is calculated by doing the addition of the recent price actions to the previous exponential moving average. The formula for calculating exponential moving average is

Exponential moving average = (Exponential smoothing constant x (Current Price - Previous period exponential moving average)) + Previous period exponential moving average

The first period is calculated by using the simple moving average.

Question 3 - Briefly describe at least 2 ways to use them in our trading operations

• Both the simple moving average and exponential moving average is great for signaling a trend direction. When the simple average and the exponential moving average is moving up, it indicates that there is an upward price movement. If they are moving down, it indicates that there is a downward price movement.

• Both are useful for determining entry and exit points. When the simple moving average or the exponential moving average is below the price, it is an entry signal and when the simple moving average or the exponential moving average is above the price, it is an exit signal.

• Both the simple moving average and exponential moving average are great for determining support and resistance areas. When the simple moving average or the exponential moving average line is rising, it creates the support area, and when the simple moving average or exponential moving average is falling, it creates the resistance area.

Question 4 - What is the difference between simple moving averages and exponential moving averages

The main different between the simple average and the exponential moving average is that the simple average only calculates the average price of any cryptocurrency asset pair over a period of time period. While the exponential moving average gives more weight to the most recent prices.

In exponential moving average, the current price data of a particular cryptocurrency asset has more weighted effect on the moving average than the previous price data. While in simple moving average, the weight is the same for all the prices over the time period.

The exponential moving average is more sensitive to current price movement compared to the simple moving average.

Question 4 - Define and explain in your own words what "Fibonacci Retracements" are and what their gold ratios are

When it comes to technical analysis of any cryptocurrency asset, Fibonacci retracement is one of the most popular tools that is used by traders and technical analysts. The Fibonacci retracement is basically a technical analysis tool that consists of a sequence of Fibonacci numbers that are taken by doing the addition of the previous two numbers which are 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, and so on… The Fibonacci retracement tool places horizontal lines on the chart which shows the possible support zones and resistance zones. It is used for drawing support lines, determining levels of resistance, and levels for stoploss and take profit. A Fibonacci retracement is simply plotted vertically on a particular cryptocurrency chart by starting from the lowest low point to the highest point to chart for a bullish move, and starting from the highest high point to the lowest low point to chart for a bearish move.

The gold ratio are; 23.6%, 38.2%, 50%, 61.8% and 100%

Question 5 – How to add a "Simple and Exponential Moving Average" to the graph

Adding the Simple and Exponential Moving Average indicator on any cryptocurrency chart is straight forward to do on trading view platform.

Adding simple moving average indicator

• Go to the tradingview website https://www.tradingview.com and on the indicators tab section, click on the indicators tab

• Go to the search bar section, on the search, search for moving average

• Select the first one written only moving average

• Click on the simple moving average area, click on the settings icon

• On the simple moving average settings, the main sections are the inputs and the styles. The input is for changing the parameters and periods. The styles sections for changing the different colour styles just for visual preferences.

Adding exponential moving average indicator

• On the indicators tab section, click on the indicators tab

• Go to the search bar section, on the search, search for moving average

• Click on the exponential moving average area, click on the settings icon

• On the exponential moving average settings, the main sections are the inputs and the styles. The input is for changing the parameters and periods. The styles sections for changing the different colour styles just for visual preferences.

Question 6 - Use "Fibonacci Retracements" to chart a bullish and bearish move

To make use of the Fibonacci Retracement tool to chart a bullish move and bearish move, on tradingview, select the Fibonacci Retracements from the tools section.

BNB/USDT Chart

For a bullish move, draw the Fibonacci Retracements from the lowest low price point the highest high price point you want analyze.

BNB/USDT Chart

For a bearish move, , draw the Fibonacci Retracements from the highest high price point the lowest low price point you want analyze.

BNB/USDT Chart

Conclusion

Moving averages have become one of the most important tools when it comes to technical analysis of any cryptocurrency asset over a period of time. They are very beneficial when it comes to analyzing price actions over a fixed period of time. Like the name, a moving average basically represents the average closing price of any selected cryptocurrency asset over a period of time. Both the simple moving average and the exponential moving average are very useful and common moving average indicators that can help traders determine the trend direction and also support and resistance zones. When used correctly, moving average can signal entry and exit points when it comes to trading and making more profits.

@lenonmc21