Trading Strategies: Moving Averages

Moving Averages are often mentioned in trading strategies. In this article we’re going to explain how you can use Moving Averages in your strategy.

What are Moving Averages?

Moving Averages are calculated to spot the Trend Direction (Momentum) of a Crypto Currency. A Moving Average is a so called trend-following or lagging indicator because it is based on past prices.

In Technical Analysis there are a two variations of these Moving Averages commonly used which are based on different calculations: Simple Moving Averages (SMA), Exponential Moving Averages (EMA).

In 2005 Alan Hull attempted to minimize the lag of these traditional Moving Averages and came up with his variation: Hull Moving Averages (HMA). Especially with the use of Weighted Moving Averages (WMA) it resulted in a more responsive and well-suited indicator for identifying good Entry Points.

What are Simple Moving Averages (SMA)?

The SMA is the most known Moving Average. The SMA is the average price over a specific period. The indicator is often used to determine trend direction. Traders often use a 200-bar SMA as aindicator for the Long-Term Trend often combined with a 50-bar SMA.

What are Exponential Moving Averages (EMA)?

The difference between both indicators is that, while the SMA calculates an average of price data, the EMA applies more weight to more recent data. Therefor you will already notice that it follows price a bit faster than the SMA.

Our Favorite: Hull Moving Average (HMA)

The Hull Moving Average indicator is a combination of Weighted Moving Averages (WMA). It gives more value to recent price changes than older ones like the Exponential Moving Averages (EMA). The result is a Moving Average that’s dynamic yet smooth, able to help identify the current Trend or Momentum.

The difference of the so called lag of these types of indicators are easily identified when all three Moving Averages are added to one chart:

The difference of the so called lag of these types of indicators are easily identified when all three Moving Averages are added to one chart:

The Hull Moving Average (HMA) was the Starting Point for our FREE Tradingview Indicator for Buy and Sell Signals, which we offer to all our Subscribers.

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