Candlestick formations are widely-used in the cryptocurrency market to determine the movement of prices in different directions within a more confined timeframe. However, this method makes it difficult for traders to see the overall daily trend across highs and lows on decentralized exchanges like Curve Finance. This is where the bitcoin moving average is the favorite technical indicator tool used by most investors in the crypto industry.
The bitcoin moving average is known for its convenience and reliability and helps traders use the momentum of their favorite crypto coin. Unlike the candlestick formations method, averages are symbolized by simple lines, making it extremely easy for anyone to determine the progress of each currency. These simple lines indicate the direction of different coins’ prices, whether they’re going up, down, or staying steady.
The most basic moving average is called the simple moving average, which utilizes only simple lines to represent data. Each simple line represents the price of a cryptocurrency at the end of each trading day or over a specified time. In this type of bitcoin moving average, a trader simply finds the average of a crypto coin’s closing prices over a period of time.
The simple moving average utilizes only a predetermined set of data and shows the average price in a more dynamic line. Also, this moving average considers all prices equally to allow investors to find the actual average of the prices for themselves. The simple moving average has been very popular among long-term investors since they look at specific time targets.
While some people look at these moving averages as the most user-friendly ones, their inherent simplicity is deemed to be their biggest problem. According to many crypto trading experts, when data points are assigned with the same weight, the outcome of each one is affected equally. Regardless of the length of each simple moving average period, inaccurate results are always feared by investors when using this method.
Simple bitcoin moving averages have three very common variations: the 50, 100, and 200-day moving averages. For measuring short-term market confidence, the 50-day moving average is ideal as it shows the accurate representation for 24 hours. In this term, trading alongside a trend is encouraged because of its predictability as compared to trading sideways.
Characterized by sharp or reversal changes in the market, the 100-day moving average is best for medium-term momentum traders. Like the 50-day term, prices above the 100-day term indicate you’re in a bull market, while below it means you’re headed into a bear market. Movements in this term are more drastic, especially due to major political and social events directly affecting the economy.
The last simple moving average is the 200-day term which is widely used to determine long-term trends. This does not tell a trader where and when buying and selling a coin is highly encouraged. Instead, it tells them whether a certain cryptocurrency is worth holding on to for a while or if it should be exchanged for a different coin.
Does technical analysis work? Absolutely! There are a variety of ways for all beginner traders to understand how and where they can gain from trading. Technical indicators like the moving average are just one of the many things they can try as it’s absolutely free. Just being smart about making decisions could bring a beginner investor to unprecedented success.