Good day, my fellow crypto lovers I hope you had a wonderful day as well, this is a Valentine week as well used in expressing Love and gratitude, and am so glad to be a part of the crypto academy assignment task today as I just enter the crypto academy I came across @shemul21 lectured and it got my attention which talks about "Crypto Trading with Moving Average" and I will be making an attempt to prove to him what I understood by his lecturer below.

1. Explain Your Understanding of Moving Average.

In statistics, a moving average may be a calculation accustomed to analyzing information points by making a series of averages of various subsets of the complete information set. In finance, a moving average (MA) may be a stock indicator that's unremarkably employed in technical analysis. the explanation for hard the moving average of a stock is to assist smooth worth|the worth|the value} information by making a perpetually updated average price.
By calculating the moving average, the impacts of random, short-run fluctuations on the worth of a stock over a nominal timeframe square measure satisfied.

Tradingview
Moving averages are a very customizable indicator, which implies that Associate in Nursing capitalists will freely opt for no matter the timeframe they need once hard a mean. the foremost musical periods employed in moving averages are fifteen, 20, 30, 50, 100, and two hundred days. The shorter the time wont to produce the typical, the additional sensitive it'll be to cost changes. The longer the time, the less sensitive the type is going to be.

Investors might opt for totally different periods of variable lengths to calculate moving averages supported by their commercialism objectives. Shorter moving averages are usually used for short-run commercialism, whereas longer-term moving averages are a lot of fitting to long-run investors. There is no correct time frame to use once put in place moving averages. the simplest thanks to finding out that one works best for you is to experiment with a variety of various periods till you discover one that matches your strategy.

2. What Are The Different Types of Moving Average? Differentiate Between Them.

We have four different types of moving averages: simple average (also named as Arithmetic), Exponential, smoothened, and Weighted. Moving Average is also calculated for any sequent information set, as well as gap and shutting costs, highest and lowest costs, commerce volume, or the other indicators. it's typically the case once double moving averages square measure is used. The only factor wherever moving averages of various sorts diverge significantly from one another is once weight coefficients, that square measure assigned to the most recent information, square measure different. just in case we tend to square measure talking of straightforward Moving Average, all costs of the period in question square measure equal in price. Exponential Moving Average and Linear Weighted Moving Average attach a lot of price to the most recent costs. The most common thanks to decode the value moving average is to match its dynamics to the value action. once the instrument worth rises on top of its moving average, a purchase signal seems, if the value falls below its moving average, what we've got maybe a sell signal.

We are going to be looking at the 3 most common and effective moving averages in the market.

---

Simple Moving Average (SMA)

---

Simple, in other phrases, an arithmetical moving average is measured by adding the prices of instrument closure over a specific number of single duration (for example, 12 hours). This value is then split up by the number of such periods.

SMA = SUM (CLOSE (i) N) N.

SUM — sum;
CLOSE (i) — current period close price;
N — number of calculation periods

---

Exponential Moving Average (EMA)

---

An exponentially smoothened moving average is calculated by adding a precise share of these terms to the previous worth of the moving average. With exponentially smoothened moving averages, the most recent shut costs square measure of additional worth. The EMA was once developed due to the fact of the lags encountered in the easy transferring average. Though the SMA and the EMA are similar, the EMA is an extra superior shifting common that offers greater weight to current prices. The EMA objectives are to enhance a transferring common that reacts quicker to the latest rate movements. Short-period merchants locate the EMA beneficial as it helps them to get the latest charge data in the market. The P-percent exponential moving average can look like:

CLOSE (i) — current period close price;
EMA (i - 1) — the value of the Moving Average of a preceding period;
P — percentage of utilizing the price cost

---

Weighted Moving Average (WMA)

---

The concept at the back of the Weighted moving average is that statistics about the contemporary charge are greater vital than the preceding day's price. The SMA and the EMA take greater consideration of the preceding facts points. Meanwhile, the WMA offers extra weight to the latest facts factors which the indicator reacts quicker to the cutting-edge price. Short-time merchants discover the WMA beneficial as it reacts quicker to little fee adjustments in the market. The WMA is calculated as

WMA = (Price1 × n + Price2 × (n-1) +...Price)/ [ n × (n+1)/2]
n = Period(number of days)

---

Difference Between EMA, SMA, and WMA

---

downward are the primary differences of the moving average between the simple, exponentials, and weight moving average.

---

EMA

---

• EMA is being calculated based on its current transition in price at the specified period in a way that it can lay more intensity on the earlier data.

• EMA make use of smoothing and current price

• EMA is reasonable for short-term trading because it does react well with shorter time frames thus giving our trading opportunities short term.

• EMA is being used of recent data relative to previous EMA

---

SMA

---

• The SMA is reasonable for longer-term trading because it makes use of the assets average price

• SMA Weigh all data with balanced importance

• High Values are more dependable

---

WMA

---

• WMA reacts more easily with current prices

• WMA is being Used to smooth price

• Higher and lower values are dependable.

Tradingview

---

3. Identify Entry and Exit Points Using Moving Average. (Demonstrate with Screenshots)

The moving average performs a necessary function in figuring out exit and entry factors in the market. To similarly illustrate how we can perceive entry and exit positions the use of transferring averages, I will be combining two shifting averages for this purpose. The SMA (50 periods) which represents the common fee information factors will be used to decide the route of price. During a robust uptrend, the rate is considered to be buying and selling above the SMA. At this, we can now go down to the EMA (20 periods) to seem to be for a purchase position. The EMA right here is used due to the fact it reacts quicker to rate and it additionally shows the interplay of merchants in the market.

Tradingview
From the chart above, we can observe after the style reversal from bearish to bullish, the rate retraced returned to discover a guide on the 50 EMA. After that, a bullish entry role can be accomplished with a bullish engulfing candle. Stoploss for this role can be positioned under the 100SMA. The cause is that if the charge needs to destroy beneath the 100SMA, it suggests a bearish reversal which the purchase position.
Let's seem at the chart under for a promote exchange opportunity.

Tradingview
In the chart I uploaded above, we can notice that the two shifting averages are above the fee which implies that the market is in a downtrend. In this circumstance, we seem to promote entry when the charge finds resistance on the 50EMA. This can be viewed on the chart above as the rate is retraced to the 50EMA. An entry role can be examined after a bearish engulfing candle with a cease loss positioned above the 100SMA.

Moving averages is beneficial technical evaluation equipment that does now not completely assist in figuring out trends. The indicator moreover helps to spot entry and exit positions in the market. In this area, I have used the 20 EMA and besides a hundred SMA. This is my desired putting for the length as it suits my buying and selling strategy.

4. What do you understand by Crossover? Explain in Your Own Words.

Moving average crossing is a procedure to take gain of trend reversals making use of an aggregate of two moving averages. This will probably be a sluggish and fast-moving average. The fast-moving average normally responds to rate quicker as it solely withstands a few information factors in its calculation. However, the slow-moving common react slower to fee as it required fee records factors for a massive range of days in its analysis.

The mixture of transferring averages to get crossover can be the mixture of the identical shifting common or unique types. For instance, two easy moving averages can be blended on a chart to get a crossover, or one easy moving average and one exponential moving average.

A good example of a shorter moving average is a 50-day moving average which is very fast and it is usually very closely tied to the current price of the market hence changing as price changes very rapidly while a good example of a longer moving average is a 200-day moving average which moves very slow

One example of a shorter moving average is the 50-day moving average and it's fast as well, which is close to a current price of a market. Another good example of a longer moving average is the 200-day moving average and it moves so slow. Before I forget we have two examples of crossover and they are the gold cross and death cross. The gold cross usually happens if the 50-day simple moving average crosses to the 200-days simple moving average while the death cross does happen when the 50-days simple moving average crosses to the 200-days simple moving average from asset rate that's all I know for now.

---

1. Death Cross

---

Tradingview
From the ETHUSD chart above, we can see that it is a loss of life go due to the fact it had to appear when the 50-day easy moving average crosses over the 200-days easy transferring common from above the asset price. It suggests a rate reversal sample from bullish to Bearish consequently telling us to enter the market with the aid of taking a suitable promoting function at round the three bearish eradicating candlesticks.

---

2. Gold Cross

---

Tradingview
Through the ETHUSD chart above if you notice you will see it's a gold cross because it had to take place when the 50-day simple moving average crosses to 200-days. This simplifies a price reversal pattern from a bearish to bullish instructing us to enter the market by entering a favorable buy position at the 3 bearish candlesticks.

5 . Explain The Limitations of Moving averages.

Some of these limitations are explained below:

• The moving average is known to be a lagging indicator because it takes into account historic charge information points and on my knowledge of understanding it means indicator can easily fool merchants into opening a function when charge motion has already arisen.

• Moving average works very well in the trending market because during the sideways market the moving average doesn't work appropriately.

• Moving average continuously gives a new data of an average of the asset

• if traders make use of an unjust moving average it can lead to failure of predicted move.

• When new data is being enforced, the refers (average) value and the predicted value are modified continuously.

Conclusion

Moving average is a piece of outstanding technical equipment that is considerably employed by way of merchants to do technical analysis. It is beneficial in the prediction of market direction, identification of guide and resistance degree as nicely as entry and exists factor in the market. More so, moving average helps a dealer to be aware of what different merchants are doing in the market primarily based on the charging behavior in line with moving average at a precise period.

Special thanks to professor @shemul21 for this great lecture he has given I hope to participate in your future tasks sir.