Using the 20-Day EMA to Trade Cryptos
One of the most popular trading indicators used by traders is the exponential moving average, or the EMA, which can be used with just about anything, stocks, indexes, and even cryptos.
Moving averages, both simple and exponential, can be used with any period provided there is enough price data available. However, the quicker the moving average, the more responsive it will be to changing prices. That means longer moving averages are considered more reliable.
- 20-day averages are used by most active traders
- 50-day averages are one of the more reliable indicators, and are considered the king of determining which stocks are in a healthy uptrend.
- With the 100-day, the longer duration is said to have more reliable trend strength, making it a reliable area for support and resistance.
Two personal favorite EMAs are the 20-day and the 50-day.
What’s nice about using the EMA is that it reduced the noise of every day price action.
Instead, it will smooth out the price action, and show the average price over a specific period of time such as 20 days, or 50 days.
Over time, the EMA becomes even more reliable as it reacts to changes in price. With the EMA system, we’re not trying to predict the market but rather to react to the current market conditions.
One of the best strategies is to wait for crossovers of the 20 and 50-day averages.
Let’s take a look Ethereum Classic (ETC) for example.
Notice what happens up to 80% of the time the moment the 20-day crosses above the 50-day EMA, as it did in November 2017.
Learn How to Spot Unique and Predictable Patterns in Cryptos
ETC rallied from $15 to $45.
Now look at what happens when the 20-day EMA crosses below the 50-day as it did in March 2018. ETC fell from $30 to $15.
We can see the same thing happen with NEO (NEO).
We saw a 20-day EMA crossover above the 50-day in November 2017, leading to a run from $36 to $200. Then, in March 2018, the 20-day crossed below the 50 in March 2018, leading to a decline from $100 to $36.
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