Moving average is a trend following indicator. Since moving average is a trend following indicator, it is therefore used by cryptocurrency traders to indicate the direction of the market, that is, whether the market is moving in an upward or downwards direction.
Since moving average is a trend following indicator, it is therefore based on bullish and bearish as well as support and resistance.
Therefore, since moving average is based on bullish and bearish, it therefore follows that when the market is moving upwards, the moving average will also be moving upwards while when the market is moving downwards, the moving average will also be moving downwards.
Based on support and resistance, we can, therefore, say that when the price rises above the highest high of a moving average when the two are in an upward movement, a downward reversal direction will be experienced by the two thus signaling the cryptocurrency trader to sell the quantity of a given number of cryptocurrency which he/she had previously purchased at a low price and was holding thus preventing their account from declining in value .
On the other hand, when the price falls below the lowest low of a moving average when the two are in a downward movement, an upward reversal direction will be experienced by the two thus signaling the cryptocurrency trader to buy a given number of certain cryptocurrency and hold them until their price rises in order to increase the value of their account This is indicated as follows;
Moving average in Support condition
For support condition, an upward reversal is always experienced. This is indicated from the candlesticks chart below;
From the candlesticks chart above, there is point A which is located along the moving average. Initially, the market was in a bearish trend. Later on, at point A, the price falls below the lowest low of a moving average thus causing the market to gain upward support. This will signal the cryptocurrency trader to make a buy order of a certain number of XRP and hold them until the price rises in order to increase the value of their account. The trader can decide to make a buy order using the limit price or the market price. When the order is being executed, the account of the trader will now have started to increase in value in terms of USDT.
Moving average in Resistance condition
For resistance condition, a downward reversal is always experienced. This is indicated from the candlesticks chart below;
From the candlesticks chart above, there is point A which is located along the moving average. Initially, the market was in a bullish trend. Later on, at point A, the price rises above the highest high of a moving average thus causing the market to resist to continue moving upward and instead to reverse downwards. This will signal the cryptocurrency trader to make a sell order of a certain number of XRP . The trader can decide to make a sell order using the limit price or the market price. When the order is being executed, the account of the trader will now have increased in terms of USDT.
Recommendation: Cryptocurrency market is highly volatile. When you place a buy order, make sure to apply risk management to be safer incase your buy order goes against you.
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