Moving Average (2)
2021.08.24 08:08
Hi It's Unicorn
After entering the Binance Exchange, select a currency pair. Here we will show you BTC-USDT.
First, click the Trading View on the upper right corner of the time-sharing chart, and then you can see MA on the upper left corner.
There is a small gear on the right side of the MA, you can input data here.
Length: It refers to time frame. Select the length of the moving average.
Source: You can select the closing price, opening price, highest point, lowest point, etc. of the trading day.
Offset: Set the offset to the right or to the left.
We can set multiple moving averages, such as 7 MA and 14 MA.
Technical analysis indicators are an auxiliary determination tool for investment. They help us simplify information, analyze some changes in market, and find patterns that will continue to happen again to get profits. Technical analysis forecasts are just a guess through statistics, so it is not absolute.
For instance, if you are in a short-term volatile market, the MA is possible to cross above or below sometimes due to the price is consolidating. You cannot use this as a signal, or you may trade frequently.
In addition, if you use the same weight for each day's price of MA, your analysis may be not correct. Because MA is the average price during a certain period of time in the past, it has a certain period of lag. For instance, the correlation between today's market price and yesterday's price will be relatively higher, but the correlation between today's market price and 20 days ago’s price will be relatively lower. When you use 20MA, the formula utilizes the price of the first day and the price of the twentieth day to average. However, the most recent price should input more weight and value. Therefore, exponential moving average(EMA) and weighted moving average (WMA) were derived to improve the defects of the simple moving average(SMA). The EMA is more responsive to sudden price fluctuations and reversals, but all of averages have value and are widely used. You should choose the type of moving average according to your strategies and goals, adjusting the settings accordingly. It’s better to combine different technical analysis indicators in order to avoid fake signals.