What are Moving Averages?

What are Moving Averages?

The Moving Average is obtained by dividing the sum of a certain number of price data by the number of data. It can be said that it is the most preferred and most reliable indicator. Moving averages are based on historical data.



Simple Moving Averages

It is divided into Simple Moving Averages (SMA), Exponential Moving Averages (EMA) and Weighted Moving Averages. The simple moving average is the arithmetic average; that is, it is the average price calculated by considering the data in a certain time period. The exponential moving average, on the other hand, is calculated based on recent price data and is more sensitive to both sudden price changes and reversals.


Weighted Moving Averages

While weighted moving averages are calculated by giving weight to recent data, unlike exponential averages, more serious weight is given to the latest data. Weight is taken into account by decreasing the importance level of the price from the last day to the first day.


Moving averages; It is frequently used in price charts of bitcoin and other cryptocurrencies, exchange rates such as the dollar, and stocks. Looking at the moving average graph, it is possible to see how much deviation is in the average of the prices. Latency times are the downside of moving averages, they cause signals to be received late. However, they are frequently used because they provide comprehensive information about the performance of the market and they are an important reference source in determining.



There are 2 basic trading situations in moving averages.


1-Buy if the price cuts the average upwards, and sell if it cuts it downwards.


It is one of the most used methods. It is necessary to make profit and time expectations according to the day of the average used. In traditional markets, 20 or less unit averages can be considered for short-term trading, 21-99 medium-term, 100-200 long-term investments. However, in crypto money markets, the order may not work like this most of the time, except for high-volume money. Therefore, while developing short-term strategies, it is necessary to look at long-term average units.


2-According to the intersection of certain moving averages with each other, it is to buy when the short-term average and the long-term average cross, and to sell when the long-term short-term.


It is known that the most frequently used intersections are 20/50, 50/100 and 50/200 intersections which have a special place.

The 50-day average crossing the 200-day average upwards is called the Golden Cross, and the downward cutting is called the Death Cross and shows the trend change in the market. When there is a golden cross, it indicates that a long-term uptrend is entered, and when there is a death cross, it indicates that a downtrend is entered.