INTRODUCTION
Hello wonderful steemian and prof @shemul21, it is a wonderful privilege to take part in this week cryptoacademy work which has to do with crypto trading with moving average and I will be responding on how I have understood the topic.
Question 1
Explain Your Understanding of Moving Average.
To me, the moving average is one of the the technical indicator we have and is being used by trader of cryptocurrency to know trend reversal, it may be a bullish or bearish trend movement and also used in knowing which decision to make in the market by traders if it is good for them to enter or exist the market so as to make profit and at the same time minimize loss, through the indicator a trader can also predict how the market is going to be which make it a very important indicator in trading.
Source
It is an indicator that is very simple which helps the trader in knowing how the signal of assets price in the market, the moving average is also an indicator that with it you can know the current assets price at a particular point in time.
In term of support and resistance, traders make use of this indicator to know the price of an asset reversal, trend reversal and it is also base on the asset previous price, it also helps traders of cryptocurrency to know the price of a recent candlestick and also know a recent trend signal.
With the help of the moving average a trader can choose a particular time frames he or she wants to trade in the market after average is being calculated.
It is also a mathematical process in which a trader may tend to calculate the mean of a set of past price of assets in a particular day.
The moving average is also a line that is not straight but dynamic and it position always changes over a given period of time.
We also have 3 different types of moving average and the are Simple moving average, Exponential moving average and Weighted moving average. I will be explaining in the types in the next question.
Question 2
What Are The Different Types of Moving Average? Differentiate Between Them.
There are three different type of moving average though there were classified into moving average, there are.
- Simple moving average
- Exponential moving average
- Weighted moving average
Simple moving average
This is the type of moving average that is simple and also easy, it is being calculated by finding the average of a candle closing price over a specific or given period of time. It is this type of moving average that helps the trader to know if an assets price will be in continuity or if there will be a possible reversal in the price of assets.
Formula
Source
From the formula
A(n)= the average in price of assets n
(n)= the number of periods in total
Exponential Moving average
This is also another type of moving average, that are bigger weight and importance are being placed on the current data or current price of assets, it also plays a great role in helping traders to determine the buying and the selling signal from the previous average or historic average.
This type of moving average also gives the trader a correct price prediction and a fast reversal in the price movement.
To calculate the the EMA by using the formula below
Weighted Moving Average
This type of moving average is the one in which enough weight or importance is being given to the recent price data of assets but when it come to the past price data it is usually less weight that is being placed on it.
It is in this moving average that a trader will be able to generate a trading signal.
Formula
| SMA. | EMA. | WMA |
|---|---|---|
| In SMA, when the price is long, this is the time the signal is more reliable | unlike SMA, when price is short it is when signal is more reliable | Here, the the signal can be reliable when the price is both short and long. |
| It is very good for long term trading | it is very good for short term trading | Good for short term trading usually a day trading because it depends on the latest data. |
| It is the same weight that us given to all data | It is not the same weight that is given to all data but the latest price receive more weight | Here, the latest data receive more weight than the previous one. |
| Here, it act slowly to the change in price of assets | it act in a faster way to the change in the price of assets | not fast, not slow but it act on a smaller change in price of assets. |
| The formula use in calculating this is simple | The formula use in calculating this is complex | The formula for calculating this is also complex. |
Question 3
Identify Entry and Exit Points Using Moving Average. (Demonstrate with Screenshots)
In identifying the entry and the exist point with the indicator moving average the trader must take note of the resistance and the dynamic which will play a great role for the trader to know which decision to make so as to minimize loss and maximize profit.
- Entry point
From the SOLUSDT chart in which I will be using, the entry point here was taken when the line of the EMA rises to intercept with the line of SMA and there is also a bullish movement in the market. In the chart also I also take note of the take profit and the stop loss which is going to help me in minimizing great loss and maximizing profit.
Source
- Exist point
From the SOLUSDT chart in which I will be using, the entry point here was taken when the line of the EMA rises to intercept with the line of SMA and there is also a bearish movement in the market. In the chart also I also take note of the take profit and the stop loss which is going to help me in minimizing great loss and maximizing profit.
Source
Question 4
What do you understand by Crossover? Explain in Your Own Words
Crossover in cryptocurrrency has to do with when 2 or more moving average it may be SMA,EMA and WMA intercept or crosses over themselves and by this will help the trader in the market in knowing and also identifying when he or she has to enter the market and generate profit and also know when to exist the market to minimize loss.
Source
With crossover, a trader will know signal of when he or she have to buy and sell assets in the market, it also aid the trader to know when there is a trend reversal in the market.
To a trader, it is important to note that when a shorter moving average crosses over a longer moving average, it gives a good signal of the price movement.
Question 5
Explain The Limitations of Moving Average.
This is the type of indicator that makes use of historic or previous price of assets movement when it is being calculated and by this it is advised for trader to confirm this indicator signal with another indicator to he sure of the signal.
if a trader does not carefully take note and adjust the moving average properly he or she may follow a wrong signal which will lead to loss of funds.
when it comes to lagging, the movement of this indicator do lag or it delay, move slowly and by this the future price of asset can not be predicted.
Whenever there is a change or fluctuations in the movement of assets price the moving average does not respond to it and this leads to loss of funds.
Conclusion
First of all, let me appreciate the prof @shemul21 for such an interesting topic which has to do moving average, it is one of the best indicator that is used in analyzing a chart.
From the topic, I learned that the moving average is one indicator that shows the trader signal to buy and sell assets, it also help the trader in know when to enter and when to exist the market, so as yo maximize profit and minimize loss.
From the topic, I also learn what cross over is all about which has to do with when 2 or more moving average intercept each other in the chart and by this it shows the trader signal about price direction.
@steemcurator02
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