The MA is now viewed by many traders as a “national” technical indicator. Whether you are a newcomer or an experienced expert, the MA line plays an important role in decision-making.
So what is the MA? What types of MA lines are there? How do I use MA for the best effect? All are answered in this Trading 101 Class. Let’s get ready for class!
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The moving average, also known as the moving average, is determined by averaging the price series over a period of time. This is a very popular indicator in technical analysis that traders frequently use. The MA is divided into 3 types, including:
This is a simple moving average that is calculated as the average of the closing prices over a given trading period.
This is a moving average performance calculated using the exponential formula. EMAs usually focus on recent price movements. Because of this, this indicator is very sensitive to short-term fluctuations and can detect abnormal signals faster than the SMA.
This is a linear weighted average that focuses on the parameters with the highest frequency. That means the WMA will focus on both high volume pricing tiers and the quality of the money flow.
Of the 3 moving averages above, the SMA is the popular choice of many traders today. Therefore, CoinCu will introduce this indicator in more detail in this article!
The SMA is divided into 3 popular types including:
SMA (7) means the 7-day moving average, which is determined on the basis of the closing price of the last 7 days. The SMA is calculated using the following formula:
SMA (N) = (P1 + P2 + P3 + .. + Pn) / N
Within:
The SMA is a slow indicator that eliminates short-term fluctuations in noise. In the long term, the SMA is also a very reliable technical indicator.
The SMA has a remarkable practical character. That is, it accurately reflects investor sentiment at support or resistance levels.
If you are a trader who often trades in short time frames like M30, M15, M10 or M5, the SMA is not an effective choice. Because the sensitivity to short-term fluctuations of this moving price is relatively low.
The moving average can be used as either a support or a resistance. Similar to most other indicators, the longer the timeframe you use, the stronger the support / resistance.
Determining the market trend with the crossing of 2 SMA lines is a popular trading method today. To apply this approach, a short-term SMA and a medium / long-term SMA.
The meaning when these 2 SMA lines cross is as follows:
The slope of a moving average, especially over a long period of time, can help you see market trends clearly.
However, you have to keep in mind that the moving average is a slow indicator. Even the slope of the MA only helps to recognize the trend more clearly. Hence, a single MA is unable to identify a market reversal signal.
The MA line will often promote the most effective area used in medium and long term transactions. Hence, if you are a trader who frequently trades short frames, there are some other technical indicators that you should combine. This will help you make better profits, or at least make sure your account doesn’t burn out.
I hope today’s lesson plan has helped you better understand what the MA is and find some ways to trade with the MA. Don’t forget to follow Transaction class 101 from CoinCu to learn more interesting and useful lectures!
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