Financial traders use many technical calculations to obtain the market context. Cryptocurrencies are digital assets with tendencies of continuing price movements in the direction of trends. Technical analysis is a vital part of crypto trending to gauge market sentiment. Moving averages (MA) are one of the most familiar technical indicators that crypto traders choose as they can use them to identify the current trend, continuation, and trend shifting points.
However, any crypto investor who wants to use MAs precisely to generate consistently profitable trade ideas requires some basic understanding and following specific methods. In this article, we will reveal crypto-adjusted MA strategies.
What are crypto-adjusted MAs?
MA is a technical indicator that shows the average price movement of a particular number of price candles. This technical indicator is an effective tool that helps traders determine trends without overflowing information. The primary concept of this tool is to discover what average participants are doing in the marketplace.
For example, suppose the price of any crypto asset remains above the 30-day MA; it indicates that the buyers dominate that asset’s price. So it enables buying opportunities, and expert crypto investors eliminate selling opportunities knowing this market context.
There are usually three types of MAs crypto traders use:
- Simple moving average (SMA)
- Exponential moving average (EMA)
- Weighted moving average (WMA)
It is essential to understand each type to use them more effectively in crypto trading.
There are other MAs:
HMA reduce lags of other MAs, and SMMA calculates differently than other MA indicators. Any crypto trading strategy that uses an indicator or concept is a crypto-adjusted MA trading strategy.
How to use crypto-adjusted moving average in trading strategy?
MAs are a common technical indicator to financial traders. Different types of MA calculate the market data differently, although the primary concept is the same. Crypto traders prefer this indicator for its easily applicable feature, functionality, effectiveness, etc., and Most exchange platforms offer this technical indicator for free.
Crypto traders often use the MA crossover concept to generate trade ideas. They use two or more MA lines. When the MA with a lower value cross the MA with a higher value on the upside declares increasing buying pressure and vice versa.
For example, you may use a 50 SMA and a 100 SMA in your chart. When the 50 SMA crosses the 100 SMA on the upside, it declares bullish force and indicates an upside surge. On the other hand, the exact opposite crossover declares declining pressure on the asset price.
Short-term trading strategy
In this short-term trading method, we use EMA 20, EMA 40, and EMA 100. EMA 20 is red, EMA 40 is green, and EMA 100 is blue. This method generates trade ideas depending on crossovers between these EMA lines. This strategy suits fine on any crypto-asset; we suggest using an hourly or 15min chart to catch the best short-term trades through this method.
Bullish trade scenario
Observe the EMA lines when:
- The red EMA crosses the green EMA on the upside.
- The green EMA crosses the blue EMA on the upside.
- The red and green EMA lines cross above the blue EMA and head toward the upside.
Entry
When these conditions above match your target asset chart, it declares bullish pressure on the asset price. Open a buy position.
Stop loss
Place an initial stop loss below those crossovers and the recent swing low.
Take profit
Close the buy position when the red EMA cross the green EMA on the downside and don’t hesitate when the green EMA crosses below the blue EMA.
Bearish trade scenario
Observe the EMA lines when:
- The red EMA crosses the green EMA on the downside.
- The green EMA crosses the blue EMA on the downside.
- The red and green EMA lines cross below the blue EMA and head toward the downside.
Entry
When these conditions above match your target asset chart, it declares bearish pressure on the asset price. Open a sell position.
Stop loss
Place an initial stop loss above those crossovers and the recent swing high.
Take profit
Close the sell position when the red EMA cross the green EMA on the upside, and don’t hesitate when the green EMA crosses above the blue EMA.
Long-term trading strategy
We use the golden crossover and death crossover concept to generate profitable trade ideas in this long-term trading method. The preferable chart for this trading strategy is the daily chart. It contains EMA 50 (red), SMA 200 (blue), and HMA 20 (green).
Bullish trade scenario
Observe when:
- The red EMA cross the blue EMA on the upside.
- The HMA (green) line crosses above the red and blue EMA and starts sloping on the upside.
Entry
Match these conditions above, and when the price closes above the HMA line, place a buy order.
Stop loss
Place an initial stop loss below the recent swing low.
Take profit
Close the buy order when the price starts closing below the HMA line, and the HMA line crosses the red EMA line on the downside.
Bearish trade scenario
Observe when:
- The red EMA cross the blue EMA on the downside.
- The HMA (green) line crosses below the red and blue EMA and starts sloping on the downside.
Match these conditions above, and when the price closes below the HMA line, place a sell order.
Stop loss
Place an initial stop loss above the recent swing high.
Take profit
Close the sell order when the price starts closing above the HMA line, and the HMA line crosses the red EMA line on the upside.
Pros & cons
Financial traders, more specifically expert crypto traders, rely on technical analysis, and the MA are a popular technical indicator to generate trade ideas. This indicator also has some drawbacks or limitations alongside many positive features.
| Pros | Cons |
| MAs are available on many trading platforms. | MAs are lagging indicator as it shows slow results. |
| You can use MAs and other trading indicators for successful trading. | Crypto-adjusted MA strategy can fail due to volume, fundamental events, etc. |
| MAs have various positive features, including trend identification, support resistance, trend-changing points identification, etc. | MAs cannot track the present cyclical behavioral pattern of the crypto market. |
Final thought
You cannot consider the cryptocurrency market as a perfect example of efficiency. However, there are many opportunities to make constant profits from this high-frequency trading when identifying the trend. MAs is the ideal indicator that can help you to achieve it.
