{"id":260683,"date":"2021-05-27T20:58:57","date_gmt":"2021-05-27T17:58:57","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/3-ways-traders-use-moving-averages-to-read-market-momentum\/"},"modified":"2021-05-27T20:58:57","modified_gmt":"2021-05-27T17:58:57","slug":"3-ways-traders-use-moving-averages-to-read-market-momentum","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/3-ways-traders-use-moving-averages-to-read-market-momentum\/","title":{"rendered":"# 3 ways traders use moving averages to read market momentum"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3fd406b46ae\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3fd406b46ae\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/3-ways-traders-use-moving-averages-to-read-market-momentum\/#Trading_in_a_range-bound_market\" >Trading in a range-bound market<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/3-ways-traders-use-moving-averages-to-read-market-momentum\/#How_to_buy_in_a_bull_market_using_moving_averages\" >How to buy in a bull market using moving averages<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/3-ways-traders-use-moving-averages-to-read-market-momentum\/#Moving_averages_as_resistance_in_a_downtrend\" >Moving averages as resistance in a downtrend<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/3-ways-traders-use-moving-averages-to-read-market-momentum\/#Dont_waste_time_looking_for_the_%E2%80%98perfect_entry_opportunity\" >Don\u2019t waste time looking for the \u2018perfect\u2019 entry opportunity<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># 3 ways traders use moving averages to read market momentum <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-5a136f3a>The first step to successful trading is the identification of medium and the short-term trends. Traders who remain on the right side of the trend and use risk management principles usually end up earning profits. An equally important activity in the trading process is calculating the entry.<\/p>\n<p>Many times, traders are afraid to pull the trigger in the optimal moment and miss a large part of the rally. As they see the markets move higher from the sidelines, the urge to buy keeps increasing and many times, they end up buying near the top. <\/p>\n<p>To avoid such mistakes, it is important to devise an easy system for purchasing. Every trader wants to buy at the low and sell at the high, but that is easier said than done. Instead, traders should focus on capturing a major portion of the rally by taking the least possible risk. Let\u2019s learn some easy strategies for doing this.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Trading_in_a_range-bound_market\"><\/span>Trading in a range-bound market<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Although the price action in a range-bound market is volatile and random, it can still be traded. If the ranges are too tight, it is better to sit on the sidelines instead of trying to trade choppy price action.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/c301a944-bcf8-4e8d-9e00-331323af3be7.png\"><figcaption style=\"text-align: center;\"><em>ADA\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/ADAUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>On the other hand, if the range is well-defined and large as in the above example, traders may try to trade it. The easy method is to buy on a rebound off the support and book profits near the resistance of the range. The stops for such trades can be kept just below the support of the range.<\/p>\n<p>The larger number of touches both on the support and resistance of the range, the better it is to trade because the possibility of whipsaws are less. Usually, every range-bound action is followed by a strong bullish or bearish move. Hence when the trend changes, traders should alter their trading strategy accordingly. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_buy_in_a_bull_market_using_moving_averages\"><\/span>How to buy in a bull market using moving averages<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>After a bull trend starts, the asset continues to make higher highs and higher lows. Traders who keep waiting to buy on a significant correction miss the bus. Therefore, when the trader identifies an upsloping 20-day exponential moving average and 50-day simple moving average, it is time to look for an entry opportunity. <\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/c994c27c-84a5-4ffb-b4c8-4ce0b56bb107.png\"><figcaption style=\"text-align: center;\"><em>BNB\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/BNBUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>Binance Coin (BNB) started its uptrend in February when the moving averages began to slope up and the relative strength index (RSI) sustained in the overbought territory. <\/p>\n<p>After the trend is established, traders should wait for a low-risk opportunity to buy. In an uptrend, the 20-day EMA acts as a strong support. Therefore, traders can wait for the price to dip and rebound off the 20-day EMA before buying. This gives a low-risk buying opportunity as the stop-loss can be placed just below the 20-day EMA or the swing low.<\/p>\n<p>In the above chart, ellipses are used to mark the points where traders could have purchased. The price dipped to the 20-day EMA on six occasions which could have been good entry points. However, on one of the trades, the stops could have hit.<\/p>\n<p>On March 25, the price broke below the 20-day EMA and the swing low was made on March 16. This could have hit the stops of short-term traders. However, the bears could not sustain the price below the 20-day EMA because the bulls bought the dips to the 50-day SMA.<\/p>\n<p>The price quickly rose above the 20-day EMA on March 27, indicating resumption of the uptrend. In such cases, traders can either buy on a close above the 20-day EMA or the most recent swing high because it signals that bulls are back in command. <\/p>\n<p>Let\u2019s investigate a few more examples.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/cc4d0186-b8b0-474c-ae03-255940e59d2c.png\"><figcaption style=\"text-align: center;\"><em>BTC\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/BTCUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>Bitcoin\u2019s (BTC) chart above is a good example of how traders who bought the bounce off the 20-day EMA (entries marked using arrows) would have hit their stops just a few days later as the price broke below the 20-day EMA and the swing low where the stops may have been kept.<\/p>\n<p>This shows there is no fool-proof entry opportunity and traders should be willing to buy again at higher prices if the uptrend resumes.<\/p>\n<p>In all three cases, the price took support close to the 50-day SMA and bounced back above the 20-day EMA. This was a signal to traders that the trend has resumed. This is <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly a good entry point as the stop-loss is well defined and the profit potential is high. On all three occasions, the trade turned out to be profitable. <\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/70744aa8-f87f-42ee-9e5f-b64c7a6f7ae4.png\" alt=\"\" title=\"\"><figcaption style=\"text-align: center;\"><em>FIL\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/FILUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>During vertical rallies, the momentum is so strong that the price does not correct to the 20-day EMA. In such cases, if traders keep waiting for the entry near the 20-day EMA, they can miss the entire rally. <\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/d6316211-bd35-49bb-8493-d115ef0311e5.png\"><figcaption style=\"text-align: center;\"><em>FIL\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/FILUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>Therefore, when trading coins that are witnessing a strong vertical rally, traders can reduce the period of the exponential moving average to 10. By doing that, two entry opportunities open up, which offer a good risk to reward ratio to traders.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Moving_averages_as_resistance_in_a_downtrend\"><\/span>Moving averages as resistance in a downtrend<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>After the trend changes direction to a downtrend, the moving averages tend to act as points of resistance.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/0c9469d5-9fa2-4588-98a7-52eb2126566d.png\"><figcaption style=\"text-align: center;\"><em>BTC\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/BTCUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>Bitcoin\u2019s 2018 bear market is a good example to understand how moving averages behave in a downtrend. Each of the relief rallies halted near the 20-day EMA, indicating the bears were shorting when the price reached this resistance.<\/p>\n<p>After the downtrend was established, there were two occasions when the price rose above the 50-day SMA. Note that before this h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ened, the RSI dipped close to the oversold territory, which may have attracted counter-trend traders.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-05\/b6946cb1-d2d2-4f48-a56c-5fdfc8a0594b.png\"><figcaption style=\"text-align: center;\"><em>ETH\/USDT daily chart. Source: <\/em><a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.tradingview.com\/symbols\/ETHUSDT\/?utm_source=cointelegraph&amp;utm_medium=sponsored&amp;utm_campaign=news&amp;utm_term=btc\"><em>TradingView<\/em><\/a><\/figcaption><\/figure>\n<p>In Ether\u2019s (ETH) bear market during 2018, see how the price remained below the 50-day SMA from June till the end of the year. The relief rallies either reversed direction from the 20-day EMA or the 50-day SMA.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Dont_waste_time_looking_for_the_%E2%80%98perfect_entry_opportunity\"><\/span>Don\u2019t waste time looking for the \u2018perfect\u2019 entry opportunity<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Most times, the best entries also fail and the stop loss orders are hit. After experiencing a string of losses, novice traders often become discouraged and do not buy at higher levels as they wait to either buy at the same level their stops were hit or lower. Because of this, they miss a large part of the uptrend. <\/p>\n<p>In a bull phase, traders should be ready to buy when the trend resumes. Treat each trade as a fresh one and do not be fixated on the profit or loss realized on the previous ones. <\/p>\n<p>Each coin\u2019s behavior is different, therefore traders should alter the periods of the moving averages to suit the coin and then devise entry points accordingly.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/3-ways-traders-use-moving-averages-to-read-market-momentum\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# 3 ways traders use moving averages to read market momentum &#8221; The first step to successful trading is the identification of medium and the short-term trends. Traders who remain on the right side of the trend and use risk management principles usually end up earning profits. An equally important activity in the trading process&#8230;<\/p>\n","protected":false},"author":1,"featured_media":260684,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDUvZTNlZDUyN2ItYzliYS00YmY5LWEyZjUtODNhZWY5YzY5MTgwLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74862,74937,74863,74860,74891,79248,10574,73785],"class_list":["post-260683","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-bitcoin","tag-bitcoin-price","tag-cryptocurrencies","tag-cryptocurrency-exchange","tag-ethereum","tag-trading101","tag-education","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/260683","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=260683"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/260683\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/260684"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=260683"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=260683"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=260683"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}