Moving average is a technical indicator used in technical analysis to identify the trend-following process. The lines represent the trading range which have a gap, a measure of strength. The bulls will consider these indicators as bullish. An extended run up with a declining gap creates a false indicator of a bearish trend.
Trade based on technical analysis is helpful but cannot give you concrete information on the immediate future of a token.
These indicator can be useful, however, to help you determine whether the near-term trend is bullish or bearish. These indicator is often used in conjunction with other analysis.
How to Identify Rising or Falling Trends?
Use an uptrend/declining trend line for an upside/downside view of the market. Use the moving average line for a downside/upside view. The ultimate answer is to trade based on probabilities. If you cannot predict what will happen in the near future, choose to trade with moving average in cryptocurrency with low-priced tokens or those with strong fundamentals.
If you know the trend and the current levels, decide which direction to trade.
The moving average a a good indicator for that. Use moving average if the Candlestick appears below it, is a signal for sell and verse versa.
Bear markets occur during a bull market. Generally, the bull market needs two consecutive corrections before a bear market can start. For a bear market to happen, you must know the reasons for the rising or falling trend. Once you know the reasons, you can look for opportunities to enter the market.
Through moving average you will see how strong or weak the trend is.
If moving average is above chart, price may mean that the trend is strong(bullish).
The problem with analysis using moving average is that you cannot predict when the trend will change. Traders will like to enter market when the trend is rising or falling.
In this case, the trader is adviced to time the market by buying when the price is low and selling when the price high.
Trading with other indicators
It is adviced to combine moving average indicators with other indicators with strong fundamentals.
The combination of the indicator with others can show you the strength of the trend and to profit from it.
The Bear market
Bear markets are defined as the market moving below the 20-day moving average or 20% below the high if that is the combination.
This is when the price of a given token falls by more than 15% from its high.
You should close the position when the price is falling by more than 15% from its high.
If you like the trend, you can buy the asset when the price is falling. This is a perfect time to buy because you want to make profit when the trend is strong.
Bull market
This is when the asset price moves in the opposite direction from the 20-day moving average or 20% below the high.
Bull market is defined as when the price is above the 20-day moving average.
You should expect to sell when the price is rising above the 20-day moving average. This is a perfect time to sell because you want to make profit from the token you bought when the trend was weak.
Conclusion
On the market, there are a few indicators that can help you to identify a trend and make an entry in the market or a sale. Although you can predict the market, you can make good decisions based on the above indicators.
You must understand that the market can be volatile. If you take long positions, you should monitor the trends.
This is one of the reasons why it is better to trade based on probabilities. In that case, you can choose to trade on tokens with strong fundamentals. When you see any of the above, elements, you can open or close the position.
You may have noticed that I mentioned moving average may show you a bullish or bearish trend. This is because price is not the same as value. It is the level of price below or above a threshold which indicates the trend.
Parting word
Buying assets when the price is on the bearish trend is encouraged.
HOMEWORK TASK:
- EXPLAIN moving average in your own words
- Explain bearish market and bullish market
- List and Explain at least two indicators that could combined with moving average.
- Conclusion
- Your Parting word
RULES:
- #blurttradinghub should be your first tag for easy recognization followed by your country tag e.g #blurtnigeria.
- For Assignment submission use #season-1week7 as your third tag.
E.g #blurttradinghub #blurtnigeria #season-1week7 - Introductory post is compulsory.
- 100 blurt power is required
- Reblurt compulsory
- Each account is allowed to enter once
- No plagiarism of any kind
- All materials including videos from the web should be properly sourced
- The assignment task link should be submitted as a comment here for easy recognization
- All entry to this Lecture closes on Saturday 11:59pm UTC.