Here we demonstrate how the moving averages are applied to Bitcoin and how it helps us determine the trend, buy and selling points or signals and how this can potentially fit into a trading strategy.
If you are to do the strategy courses, we explain more in detail how the Moving Averages are used for a few trading strategies.
Definition of a moving average when you look at this video.
A 10 moving average on the daily chart, means the tool draws a line by adding up the last 10 candles and working out their average value and then plot it on that day. When the next daily candle closes, it counts the last 10 candles again and plots its average value. So the moving average is only a reactive indicator, it only tells you what has happened.
Now there are 2 popular moving averages to use. The simple moving average or sma or ma and the exponential moving average which has another formulae it uses to determine the average value in a defined time frame.
Basics on Moving Averages
This is a tutorial for people who are just starting off using Tradingview and how to use the moving averages indicator as part of your toolset on the charts.
Here we demonstrate how to use the moving average to understand the trend, and how it can help to identify buying and selling opportunities.
Note: you can expand this video by just watching in Youtube. Click on Youtube to change the screen settings to your liking.
What is a Death Cross?
Often, the Death Cross can happen in any stage of a typical market cycle. The Death Cross is interpreted by chartists as a pointer that signals the beginning price slumps.
First, when prices are peaking. During this exhaustion, prices of the asset, in this case, BTC fall, forcing the short-term moving average to fall over the long-term moving average, the 200-day MA. Second, after a period sustained downtrend. Here, the uptrend is over and prices are retracing marking a climactic sell phase where asset prices drop dramatically as bears step up, forcing lower lows.
Using Moving Averages to understand the TREND
To understand this section, you must know what the definition of a trend is from a traders perspective. This section is also covered under “trends” module.
The first thing a trader must do is find the most suitable time frame and the moving averages combination to that represent the trend. We can only demonstrate this visually with the following BTC chart below.
Key points on the chart:
We have selected the 4 HOUR chart using the 10, 20, and 50 MA on the daily. What is important on this chart is that you can see in the uptrend, bitcoin price action is well represented with the 10 MA on the daily time frame, then followed by occasions with the 20 MA and in blue, the 50 MA on the daily (green).
Now note when the 10 MA (white) crosses over the 20 MA (orange), we see now that the macro trend is also downwards orientated.We can therefore use this in conjunction with the pivot points on the previous example charts, to confirm that there is a change in trend. After that point, if you look at the price action in 2018, the 10, 20 MA became consistent as resistance, not support, which is another confirmation that we are a) in a down trend and b) a bear market or correction phase of the price cycle.
Now look at the bottom of the chart where we highlighted in blue the cross over of the Moving Averages. First the 10 and 20 MA cross over, which is the initial bullish sign and eventually both the 10 & 20 MA cross over the 50 Daily MA (green) and eventually the 200 daily MA (blue) which is known to be a key number for resumption of an uptrend and bull market.
The VWAP indicator:
> is another moving average indicator and can be used as a trading strategy.
> I’m not saying I endorse this strategy, but this video does give you tools to understand how these indicators combined can prevent you making mistakes as well.
The Alligator indicator:
> is another moving average indicator and is useful in the big time frames.