How to Choose a Bitcoin Moving Average to Trade With
Moving Average Leading Cryptocurrency Indicators
A trader can choose a moving average based on the chart time frame that he is trading; the trader might choose to use this Moving Average indicator on the minute cryptocurrency charts, hourly charts, daily charts or even weekly charts.
The trader can also choose to average the closing price, opening price or median price.
Moving average indicator is a oftenly used indicator to measure strength of trends. Data is precise & its output as a moving line can be customized to a trader's preferences.
Using the bitcoin trading moving average is one of the basic ways to generate crypto buy and sell trading signals which are used to trade in direction of the trend, since the Moving Average indicator is a lagging indicator & a trend following technical indicator - this means that it will tend to give late crypto entry signals as opposed to leading cryptocurrency trading indicators. However, as a lagging indicator it gives more accurate cryptocurrency signals and is less prone to whipsaws compared to leading trading indicators.
Bitcoin Traders select the moving average period to use depending on the type of bitcoin trading they do: short term bitcoin trading, medium term trading and long term cryptocurrency trading.
- Short-term bitcoin trading: 10 - 50 Moving Average Period
- Medium-term bitcoin trading: 50 - 100 Moving Average Period
- Long-term bitcoin trading: 100 - 200 Moving Average Period
The price period in this case can be measured in minute charts, hourly charts, daily crypto charts or even weekly charts. For our example we will use 1 hour crypto chart time frame period.
Short term bitcoin trading moving averages are sensitive to price action and can spot trends signals faster than the long term moving averages. Shorter term bitcoin trading moving averages are also more prone to whipsaws compared to long term moving averages and a trader should choose a price period that will generate a signal early but not give too many bitcoin trading whipsaws.
Long term bitcoin trading moving averages help avoid bitcoin trading whipsaws, but are slower in spotting new trends and trend reversals.
Because long term moving averages calculate the average using more price data, it does not reverse as fast as a short term bitcoin trading moving average and it is slow to catch the changes in the trend. However, the longer term bitcoin trading moving average is better when the trend stays in force for a longer time but may also give late bitcoin trade signals.
The work of a trader is to find a moving average period which will spot trends as early as possible while at the same time avoiding fake-out signals (bitcoin trading whipsaws).
