Hello Lovely People
How's everything going on. I hope you're all doing very well. Today I'm writing homework task for professor @shemul21 which is about Crypto Trading with Moving Average.
Let's Start.

Explain Your Understanding of Moving Average.

There are many tools and indicators within the technical analysis that help in identifying the trends in the market as well as their continuity or possible reversal. Moving average is one of the most well-known and widely used indicators in technical analysis. Its appearance is that of a continuous line with a value in its velocity.

The moving average indicator consists of a single double line that facilitates changes in the value of assets. They are used to indicate current price trends by collecting data from previous days based on price data to plot the average price. Proving its effectiveness, correcting the average of any observed candle, in addition to the functionality to determine the moving trends, their reversal, panorama to establish business opportunities at the same time.

Source Tradingview

Its interpretation is based on a simple concept, which confirms the buying opportunity when the price exceeds. On the contrary, if it goes down, it will be a sign of substantial sales. Similarly, there are different types of moving averages, which differ in the data they take to perform the average and also what kind of setting you want to highlight.

The advantage of this indicator is that we can indicate a change in the trend and see the average market condition in any of the chart conditions, whether it is upward trend, downward trend or sideways. Based on this, we can say that we have an overview of what is happening in the market thanks to this basic information.

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

The most commonly used moving averages are: Simple Moving Average, Exponential Moving Average and Weighted Moving Average.

Simple Moving Average (SMA)
Simple Moving Average (SMA). This is the simplest form of moving average. Its composition responds to the sum of all price closures for the selected period, divided by the number of periods. In this type of moving average, all data weighs the same. The result is a line that moves by adding each new period, while removing the old period.

Calculation

SMA = C1 + C2 + C3 + .... Pn / n

C = represents the closing price.
n = number of periods

Exponential Moving Average (EMA)
Exponential Moving Average (EMA). The purpose of this type of indicator is to refine the data far beyond a simple moving average.

Its construction is based on a simple moving average, but it uses other factors that give more weight to the current data. This difference makes it more sensitive and closer to the original price, which makes it more efficient to follow the trend.

Calculation

EMA (Today) = ((Price (Today) - EMA (Previous)) x Multiply) + EMA (Total)

(Closed Price - SMA (Total)) x Multiply + EMA (Total)

Weighted Moving Average (WMA)
Weighted Moving Average (WMA). This shape of the Moving Average is similar to the previous shapes, but in its formation weight factors are used for each particular period, so that the weight of the earliest period is minimal and the weight of the most recent period is maximum.

This feature allows you to react quickly to changes in prices, minimizing delays in simple moving averages.

Calculation

WMA = C1 × n + C2 × (n-1) + .... Cn / [n × (n + 1)] / 2

C = price
n = number of periods

Simple Moving Average (SMA)	Exponential Moving Average (EMA)	Weighted Moving Average (WMA)
Consider the average value of an asset over a period of time.	Consider the current value and the smoothing factor.	Gives more weight to the current price.
All data is of equal importance.	Give more importance to the latest data.	Give more importance to recent data and move away from old data.
Responds later to price changes.	Responds quickly to price changes.	Responds quickly but slower than EMA.
Least sensitive to most recent price.	Most sensitive to most recent price.	Most sensitive to most recent price.
Most useful in long-term trends.	Greater profit in price reversals.	Useful for any trade where current price is important.
The higher its value, the more reliable it is.	The lower its value, the more reliable it is.	It is reliable with high and low values.

Identify Entry and Exit Points Using Moving Average.

Moving averages are useful for identifying trends and establishing support and resistance zones, these features can be used to find the right points to perform buying and selling operations.

Upward trend

To indicate an uptrend, the 20 period EMA has to go through the 100 period EMA from the bottom to the top and as a result the price should be above the 2 EMAs to consider that we are in the up trend.

Source Tradingview

I enter into an operation where the price breaks the 2 EMA and the result is a blush cross where there is a buy signal, so our stop loss will be below that which acts as support. And makes a profit at a distance less than or equal to that our stop loss.

Source Tradingview

Downward trend

When the EMAs are above the price and below the 20-period EMA 100 we enter the downward trend.

Source Tradingview

In these cases it is advisable that when the price breaks from the top to the bottom of the 2 EMA, the candle that forms becomes our entry and risk management where we place our stop loss above the EMA 100 periods that act as resistance and dynamics and as a result we keep them at a distance equal to or greater than our stop loss.

Source Tradingview

What do you understand by Crossover?

Moving average is a very important technique for crossover traders as it allows you to see the correct crossover on the chart which is near the moving average. Therefore two moving averages are used to get the result and when these two averages are implemented the trader has the ability to confirm the entry or exit of the trade keeping in mind that we have to look at the trend.

Source Tradingview

In the graph it shows the course of EMA from 100 to 20 periods from bottom to top indicating that a trend truck is from bottom to top with which we can find more viable buying operations.

Another point in favor of using two moving averages is that two pairs of signals show the wrong signal at the same time, which gives us an idea of ​​what is happening in the market and therefore the trader should not fall into the wrong signals.

The chart shows a downward trend when the 20-period EMA moves up and down to the 100-period EMA which indicates the current change in the trend, indicating that we should trade the sell.

Source Tradingview

We should have another point in favor of the implementation of trade and that is that when the moving averages move from the bottom to the top, the trader takes a long position in the market, but when the opposite happens, the trader expect short positions. Asset in the market, since it is a basic element that takes into account the data that may appear in the market indicators.

Explain The Limitations of Moving Average.

Although moving averages are very useful for identifying trends, they have some limitations, such as:

• Moving averages are based on the past, which can produce many incorrect and late signals in the market.

• Moving averages are more reliable in the trending market, as they do not work properly in the literal market and can produce erroneous signals.

• Moving averages are indicators of a trend but not of generating trading signals and therefore the trader should be careful in his strategy not to rely solely on the moving average.

• Moving averages are not very useful for the sideway market.

• A certain level of knowledge and experience is required to use the various dynamic averages correctly and to interpret them and to make the best use of the trader's trading style.

• Moving averages do not have the ability to provide data information which is beyond the average period, which makes it very difficult to search for data.

Conclusion

Moving averages are the most well-known and used indicators in technical analysis. It is one of the most widely used tools for identifying market trends, although it is based on past movements. As we can predict future movements with the help of calculations. The Moving Average is highly appreciated by traders for their tremendous effectiveness in identifying and following trends. Despite their tremendous effectiveness, moving averages can give the wrong signals in some situations, therefore, it is recommended to use them with other technical indicators to maximize the chances of success in trading operations. Lastly I would like to thank Professor @shemul21 for this stupendous lecture.