The bitcoin moving average is a technical indicator that lets people know the average price of a stock in recent market activities. It has been the most widely-used and most popular technical indicator in the world for several years now. The bitcoin moving average has helped thousands of traders worldwide, on Curve Finance and other places, gauge market sentiments and ascertain prices in a more precise manner.
How does technical analysis work?
Technical analysis is one of the most vital tools in the cryptocurrency market for every trader to use to succeed in trading and investment. These tools have become more accessible recently as a wide range of technical indicators has been created in recent years. The moving average is considered one of the most effective indicators as it equips traders with knowledge on trends in the market without giving an excessive amount of details.
In a nutshell, the moving average is aimed at knowing how average traders are faring in the market. For instance, if the price of a crypto asset is over the 50-day moving average, then this asset’s buyers are more active than its sellers. With this fact in mind, traders of this cryptocurrency can consider only buying opportunities instead of selling to optimize their financial gains.
There are three types of moving averages considered most effective by the majority of crypto traders
The first type is simple moving average or SMA; it calculates the average price of a currency for a predefined set of data. Unlike the basic moving average, which shows only the average price, the simple moving average shows all the data in a dynamic line.
The second type of moving average is very popular among crypto investors; it is the Exponential Moving Average or EMA. Just like the simple moving average, the EMA tracks a particular trend’s direction, though its findings are considered more accurate for investors to use. The major difference from SMA is that EMA comprises more complex calculations and places greater emphasis on recent price changes.
The exponential moving average is ideal for short-term trading as it utilizes the latest data in its calculations. Moreover, trading experts encourage traders and investors to integrate EMA with SMA, especially if they want to test the waters before buying or selling. Through this, they might decide on whether they should aim for long-term trading or settle for short-term engagement in a particular currency.
The final type of moving average is the Weighted Moving Average or WMA, the type that uses the most recent pricing first. Unlike the simple and exponential moving average, WMA focuses less on previous raw data and more on recent data points. In addition, compared to SMA, WMA provides more vivid details on the frequency of the concurrency trades.
Aside from being a highly efficient and effective technical indicator, most types of moving averages, including the three mentioned, are free. Moreover, multiple moving averages can be used simultaneously since market changes are constant and different cryptocurrencies’ calculation methods vary. As you can tell, anyone wondering “does technical analysis work?” has their answer: yes! Traders in the market are encouraged to take advantage of these brilliant technical indicators to increase their gains.