Are Moving Averages Reliable Indicators?

Happy Monday everyone!

Continuing from my previous post on applying the 50-Day EMA on our STEEM/BTC chart (check out the post here, here is the latest snapshot of STEEM/BTC today:

On the far right bars, we now have 4 wicks touching the 50-EMA line, but failing to close above it successfully. The most recent bar, happening today, doesn't look like it's going to break above it either. If that's the case, we'll now have 7 consecutive sessions where we will be so close but fail to break above the 50EMA. So is this just a coincidence or is the 50-EMA for real?

In my experience doing technical analysis, I've not really relied heavily on the Moving Averages. I've done backtests in the pasts and have concluded that relying on them solely for buy and sell signals aren't foolproof strategies. EMA's tend to be lagging indicators, meaning price could already have assumed a new trend before it crosses the EMA line.

However, a quick glance at the chart above does reveals that had you:

1. Bought on Dec 18, 2017 when price crossed above the 50EMA line at 0.00013, you would just be at the right time to jump in for the ride to 0.00060. Also,
2. Sold on Feb 17, 2018 when price crossed below the 50EMA line at 0.00041, you would also have made a handsome profit as price moves down to the 0.00020s.

In both cases, the 50EMA signal would turn out correct.

And that's where a lot of experienced chartists would caution the beginner trader. Just because we've had 2 consecutive correct signals doesn't mean that an indicator would prove to be reliably correct forever. Surely, indicators can always go the way you expect it to go. However, the cautionary note to keep in mind is that it can also go the opposite direction of where you want it to go. If you do backtesting on any chart, you'll most likely find that prices can go in any direction in varying speeds. There are just so many permutations possible such that an accurate prediction where price is headed even in the foreeable future is just not possible.

So I always try to heed caution to others, especially when people personally approach me for technical analysis advise. This market is live! There are all sorts of people trading, each with their own ideas, their own strategy, their own perception on the price. No indicator can sum up all these viewpoints and provide a reliable signal on what will happen even in the next hour of trade.

What's your take? Would love to hear your opinions in the comment below.

Trade carefully! Have a great day everyone.

Risk Warning: All comments, charts and analysis on this post are purely my own and should in no way be treated as recommendations or advice, nor should they be construed as an endorsement or recommendation to buy, sell or hold. Please do not trade based solely on the information provided on this post. Furthermore, past performance does not guarantee future success. Always do your own due diligence and analysis when trading.

Chart courtesy of TradingView