How do I set up the Moving Average, and how does it help in trading?
A moving average is an additional line on the price movement graph. It repeats the price movement graph but with a lag and smoothes (averages) the price data.
Moving averages can be used to identify the trend and form support and resistance levels. Based on moving averages, other important indicators are built, such as Bollinger Bands, among others.
How to calculate a Moving Average
A moving average is an average of data points for a specific time period. Accordingly, it is calculated by the following formula:
MA = (price 1 + price 2 + price 3 + … + price N) / N
where:
- MA = Moving Average
- N = the number of time periods for which the MA is calculated (it can be measured in days, weeks, months, etc.).
- Price 1 = price for the current time period
- Price 2, price 3, … = prices for past periods.
For example, let’s calculate the MA for three days.
Coin X costs $10 today. Yesterday, its price was $11, and the day before its price was $15.
MA = 10 (price for today) + 11 (price for yesterday) + 15 (price for the day before) / 3 = 12
How to use a Moving Average
Have a look at the screen. The blue line is the short-time moving average (calculated for 50 candles). Depending on the price movements around it, you will get a Buy or a Sell signal.
If the asset price is above the MA line, it means that the asset is overbought. Soon, the price may drop back to the indicator value. That’s why it is the best time to sell the asset because later, its price may drop.
When the asset price is above the MA, you will receive a Sell signal.
If the asset price moves below the MA, it means that the asset is oversold. Soon, its price may start growing and reach the MA, and thus, it is the best time to buy the asset.
When the asset price is below the MA, you will receive a Buy signal.
The red line is a long-term moving average (calculated for 200 candles).
Depending on its behavior, you will also be getting Buy or Sell signals.
If the green MA (short-term MA) crosses the red MA (long-term MA) from below, you will get a Buy signal.
If the green MA (short-term MA) crosses the red MA (long-term MA) from above, you will get a Sell signal.
How to set up MA
To set up signals based on an MA movement, open the Alerts tab.
- Pick the exchange.
- Select the coin pair for which you want to receive alerts.
- In the Select indicator field, pick MA - Moving Average.
- Click on the Set Alert button.
That’s it. Now, you will receive alerts as soon as a Buy or a Sell signal comes.
If you want to change the alert settings, click on the Open Settings button in front of the alert, and implement the required changes.
To delete the alert, click the Delete Signal button in front of the alert you want to delete.