Dear Cryptuminati,
Many beginners wonder which indicators to use. That's why I started this series with the 7 best indicators. It is not just any indicators, but those that are best suited for crypto trading.
#2 Moving Averages (MAs)
MAs are a very popular chart tool. In Binance, this indicator is used by many traders. This makes MAs a powerful all-purpose weapon.
I use MAs in these cases:
- Identify trend direction
- General chart analysis (MA as support or resistance)
- Entry (when two MAs cross, positive crossing -> Golden Cross, negative crossing -> Death Cross)
- Exit (MA as price target)
As you can see, moving averages can be used in many ways. Behind each MA is a number. Binance provides you with the three MAs 7, 25 and 99, which represent the number of candles to be included in the calculation. Long-term oriented traders are oriented to MAs with a value of 50 or more, while those who invest short-term often work with MAs such as 7 or 25.
MA 50 and MA 200 are very popular!
If the candle approaches one of these lines, you should observe the reaction carefully.
Example:
Let's look at the upper chart. Entry and exit took place at the intersection of the two MAs 50 and 200.
- In the first example, the trade was a complete success.
- The second trade was a flop.
Both trades were up, but only the first was able to close in the green figures. In the second case, the price has crashed.
What's the problem?
MAs need some time to follow up. By then, the course may have plummeted!
My tips for moving averages:
- Use Binance's standard MAs. Many traders work with them, which makes them interesting as price targets or resistances/supports.
- MAs harmonize very well with Stochastic RSI (StochRSI). This is another popular indicator on Binance.
- To see a trend, look at several time levels. Short-term traders can also work with smaller levels such as 5 or 15 minutes. Long-term traders should choose 1, 4 hours or 1 day.
Conclusion
The above two examples show that you should never trade MAs alone. A large part of the profits is lost if the price turns in the other direction. Always combine MAs with other indicators such as StochRSI.
With MAs you can quickly see the general trend. A glance at the MAs 50 and 200 is sufficient for this. Also pay attention to how long the trend has been going on or whether it has only just begun. Some trends don't make the breakout.
The Eye of the Cryptuminati has spoken.
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Risk note: Everything is possible, nothing is necessary. All information is not a buy or sell recommendation.