With the ever-increasing use of virtual currency and its volatility, cryptocurrencies are being adopted across the world for various transactions. Cryptocurrency derivatives trading is a new trading area that many daytime traders are interested in. The last time we give you a brief introduction to the types of orders. In this article, we will give you the basics introduction of moving averages, so you may have a deeper understanding of it.
What is Moving Average？
Moving averages provide a very simple means of smoothing a price series and making any trends more discernible. A simple moving average is defined as the average close of the past N days, ending with the current day. For example, a 40-day moving average would be equal to the average of the past 40 closes, including the current day.
Typically, moving averages are calculated using daily closes. However, moving averages can also be based on opens, highs, lows, or an average of the daily open, high, low, and close.
Also, moving averages can be calculated for time intervals of data other than daily, in which case the “close” would refer to the final price quote in the given time interval.
The term moving average refers to the fact that the set of numbers being averaged is continuously moving through time. You need to note that the moving average clearly reflects the trend in the price series and smooths the meaningless fluctuations in the data. In choppy markets moving averages will tend to oscillate in a general sideways pattern.
How to use it？
One very simple method of using moving averages to define trends is based on the direction of change in a moving average’s value relative to the previous day. For example, moving would be considered to be rising if today’s value was higher than yesterday’s value and declining if today’s value was lower.
By definition, since moving averages are based on an average of past prices, turning points in moving averages will always lag the corresponding transitions in the raw price series.
In trending markets, moving averages can also provide a very simple and effective method of identifying trends. There are many other ways of calculating a moving average besides the simple moving average described in this section, we will discuss this point if we have a chance.
Thanks for your time, after reading this article, you may have a deeper understanding of the moving averages? It was an honor to share the experience of cryptocurrency derivatives trading with you. In the next time, we will discuss the chart patterns. For more information, please follow all of our newest articles on Bybit.
Bybit is cryptocurrency derivative exchange with 100x leverage BTCUSDÐUSD perpetual contracts, and also 25x leverage EOSUSD&XRPUSD perpetual contracts providing a fairer, faster, and more human trading environment. With a matching engine 10x the industry speed, a 24/7 multilingual CS, and an advanced order system. www.bybit.com