How To Trade Using Moving Averages (Simple Secret Strategy)
An easy and effective trading strategy is one using the EMA (Exponential Moving Average) or SMA (Simple Moving Average) trading tools. They basically give you the average price of the market over a period of time – days, weeks or months. Most commonly used are the 21 week moving average, the 34 week and the 200 day MA.
EMA’s pull more recent data through and place a higher weighting on it than older data, meaning it’s more responsive to the latest price changes than an SMA generally is. This key difference is probably why it’s the more preferred average out of the two for most traders – more technical analysis guides here.
Using these tools as part of an overall trading strategy can be very powerful when you target the EMA & MA crosses. For example an EMA cross can indicate a great buying opportunity (Golden Cross) when the shorter term moving average crosses ABOVE a longer term moving average indicating a potential rally to the upside. Alternatively a sell signal (Death Cross) would be when the shorter term average crosses BELOW the longer term average.
Best Moving Averages To Use On Specific Time Frames
If you look at whether a specific coin or any instrument is trading above or below its 200 day moving average this will give you a good indication if it’s currently in the bull or bear zone. This is calculated by adding the closing prices of the previous 200 sessions and then dividing by 200, this gets repeated the next day forming a line by which you can see long term support. Above the 200 day MA and its bull town baby and obviously the opposite is true – below and its traditionally considered bearish territory.
Usually with MA strategies it’s recommended to use Fibonacci sequence numbers. These beautiful sequences appear in many natural things all around us; interestingly both in biological and financial settings. You’ll be able to find them in hurricanes, spiral galaxies, peoples faces and even in a woman’s uterus. The appearance of these numbers can be applied to the charts mainly in the form of retracements, arcs, timezones and fans.
Using a moving average trading strategy that incorporates some trading basics like setting a stop loss, keeping a check on order size, order cost, etc you can trade simple crossovers occurring between the 21 and 55 week exponential moving average. One trade example would be when the 21 crosses below the 55 for a sell signal.
An automated strategy that uses MA crossovers in confluence with the Stochastic RSI and a sensible stop loss has proven to be a winner for users of MDX ALGO. Comparison trades are proving an automated strategy left running over an optimum time scale showing over 33% more gains. Head over now to the MDX ALGO for access to indicators, automated strategies and other trading tools and remember to join the official discord where you can find users posting their trade setups and results every day.