Been learning about trading signals

Been learning about trading signals. Many signals are predictive and attempt to anticipate the future. But there is one indicator (or combination of indicators) that seems to be bulletproof in indicating market turnaround. It's very simple to use.

This would be the crossover of exponential moving averages, mainly the 8- and 21-day EMAs. If you plot for example BTC or ETH on the hourly, daily or weekly timescales, you can clearly see the lines flipped reliably for all major uptrends or downtrends.

Bullish - 8 crosses over 21 (and stays there)

Bearish - 21 crosses over 8 (again stays above it)

The key thing to note is that this is a lagging indicator. This is not a predictive mechanism, it will not allow you to time bottoms and tops perfectly. But you will catch the meat of the move. You can plot them with tradingview - free account. Make sure you plot exponential moving averages and not moving averages. (The EMA uses all past data, with weightage leaning exponentially towards newer data points). Try this for your favourite altcoins, I found the results quite surprising.

BTC chart 8- (blue) and 21-day (red) EMAs, daily timescale

The 21 (red) crossed over the 8 (blue) back in early April 2022 and there was a consistent downtrend until mid-July. The lines turned bearish again a few weeks ago. I did not know about EMAs back in May and I bought the dip. June made me wish I hadn't.

The community here (which I have grown pretty fond of over the last year or so) has a fetish for DCA. But there have been so many studies and posts that show that it's not a hugely successful strategy. I'm not shitting on DCA, but I think with this tool you can do a weighted DCA. Always better to DCA when the market is 50% down or more, but when the trendlines still suggest things are bearish, couldn't help to postpone some of your buys until the local bottom is reached.

Here's a little extra sugar. I really like CTO Larsson he is a decent Youtuber and Twitter crypto influencer. He has a product he sells as part of his trading course (mainly for BTC) he calls it the Larsson line. Essentially the same idea, when the lines crossover in one direction they turn gold, buy signal. Flipping the other way they turn blue, sell signal. Simplified for busy people but nonetheless useful. After playing around with the EMAs I think his line is a combination of the 31- and 58-day EMAs. (Messaged him about it on Twitter but no answer lol). According to his latest videos, his lines only flipped gold once since the downturn from 69k BTC, around April 2022. This combination of EMAs gives roughly the same behaviour. He probably has more complex aspects contributing to his trendlines, but I was curious so I tried to crack his method. Notice the lines did not cross to bullish during the recent July BTC uptrend.

BTC on the weekly timescale - the 31 and 58-day EMAs. CTO Larsson-style. Sell signal last November.

So of course here comes the mandatory - this is not financial advice. Use this information as you see fit. If you've stuck around this long you have no doubt been upgrading your knowledge and general crypto game. Add this tool to your arsenal.

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N.B.

There are some presets on tradingview:

8EMA's Fibo... by Jaivan - if you don't want to plot the data yourself. Just remove all the lines except for the 8 and 21 EMAs.

You can also set alerts on trading view to tell you when the lines have crossed.

Some solid TA guys if you want to learn more:

T.A. with Keith Laye (Youtube), Professor Keith @ Carolinakeith_1 (Twitter)

I am groot, @ IamGrxxt (Twitter)

They both work with the defi lad - Stephen the calculator guy - all in the same paid discord