free web page hit counter Trading for Beginners – The Best Strategy System with Moving Averages

Trading for Beginners – The Best Strategy System with Moving Averages


What is a moving average?

A moving average is a widely used indicator in technical analysis that helps smoothing out price action by filtering out the “noise” from random price fluctuations.

They are calculated by taking the average closing price of a currency pair for the last ‘X’ number of periods. It is a trend-following, or lagging, indicator because it is based on past prices.

Moving averages are a simple way to see overall price behavior for an asset, and are also used as variables for a number of more complicated technical analysis charts and tools.

The highest the number the smoothest the moving average and because moving average is an indicator used to forecast future prices the highest the number of the moving average the smaller number of signals you get.

There are many types of moving averages. The two most common types are the simple moving average and the exponential moving average.

Simple moving average or (MA or SMA) are the simplest form of moving averages, but they are susceptible to spikes and this can trigger false signals. By other hand exponential moving average (EMA) puts more weight to the recent price, which means they place more emphasis on what traders are doing recently.

The most used are 3 moving averages:

EMA20 (pink) - it pays more attention to recent prices,

MA50 (blue)

MA200 (green) - they work well at longer time frames and also give good ideas about what the overall trend is doing.

The Best Strategy System

We are buyers when moving averages are moving up, we exit when they are flattening out and we sell when they turn down. Like any other trading system we got our own rules so in the following examples we will show you how to apply this rules to.

Entry strategies

When EMA20 is above the MA50 which is above MA200, we are in an uptrend. We buy dips against the moving averages following these rules:

  • Green candle after reds.
  • Price test 20 ema.
  • CCI turns green.
  • And as long as we are above 200 MA, we can buy dips
  • When we get above the 200 MA (bullish reversal), there is almost always a pullback. Which is a good risk: reward entry point. Some traders buy on the cross of the 200, while some others will buy as soon as they spot a bullish reversal.

Exit strategies

When the EMA20 (pink) goes below the MA50 (blue) or when moving averages are flattening out we get out following the next rules:

  • When a candle breaks the lows of the previous candle. take half profits and wait for the buy signals and add on to your position.
  • If price breaks the EMA20, MA50 and/or CCI turns red.
  • If you are very far from the MA50 (more than the average of the chart), get out on the first red candle
  • if you close below the EMA20 and you couldn't get out, exit definitely if you close below the MA50.
  • If you are really stretched (price very high from 200 ma), you should go down to 15 min and get out on a reversal this means when the MAs cross each other
  • In a downtrend when EMA20 is below the MA50 which is below MA200, every rally to EMA20 is a sell. Sell pullbacks to the EMA20

Long-Term & Short-Term Trades

Whenever you want to trade with a short-term target on the daily chart, it would be helpful to take countertrend entries on smaller time frames (15 minutes or 1 hour).

If you are getting long on a counter-trend signal and the price is above the 20 EMA, your exit should be when the price closes below the 50 MA. You will buy back if the price crosses and pullbacks to the moving averages.


a) In Crypto the 4-hour charts are good for trend trading but If you have more time on your hands, trade in an hourly. It will give you tighter entries and stops.

b) Sometimes is useful to transpose a known moving average (MA) from a bigger time frame to a smaller and vice-versa, this multi timeframe moving average calculation can be done by applying the next cross-multiplication:

Required ma = (given time frame * known ma) / (time frame where we want to import the ma)

For example, the MA200 MA (known ma) on a 15 min chart (given timeframe) is the hourly (60 mins) MA%) (required ma).

Required ma = (15*200)/60= 50

c) When trading on an hourly timeframe during pullbacks, most of the time in crypto, the price doesn't come all the way back to the MA20. When this happens, you go to a lower time frame for a tighter entry.

d) Crypto market moves really fast, therefore it's difficult to find an entry on the hourly. Most of the time you'll need to go down to a 15 min to get an entry.

How to spot a sharp reversal?

a) The distance between the MA200 and the price, is an indicator of a sharp reversal. If the price stretches too far, more than the average, it is bound to be a correction or reversal.

In such case, take your exit on the first red candle or in the first close back to the EMA20.

In case you miss the earlier ones, take your exits on the MA50 or the MA200.

b) In a bearish setup, EMA20 ema is below MA50 which is below MA200, we draw trend lines to connect the lows, and when we break down from there, it is a perfect sell setup.

Trend Reversal Strategy

  • You can spot the first signs of a reversal on a 15 min, then an hourly and then 4 hourly timeframe and so on.
  • It's important to recognize bullish reversal in a downtrend before the trend becomes bullish because you get in at a better position.
  • In a downtrend, we need to see at least a double bottom or a lower bottom than the pre- vious one to make sure that the price has bottomed out.
  • Therefore, to spot a reversal we go down to smaller timeframes (15 mins) and watch for a breakout. When the moving averages become bullish (20 ema above the 50 ma) we will get a cross which should consolidate and hold against the 20 ema and continue higher.

Golden Rules

  • If we are trending, we should keep making higher lows higher highs (bull market) / lower lows and lower highs (bear market), otherwise we are just consolidating (not going anywhere).
  • previous highs are always the new resistances after a correction.
  • the MA20 is our best friend we use it to get it and out of trades all the time, on smaller timeframes it’s our trigger and on bigger timeframes is our trend system most important signal.


All about Bitcoin Halving - History and Price Predictions

What is a Bitcoin halving?A halving is a planned reduction in rewards miners receive (the term is mentioned in Bitcoin’s code). Halvings happen once every 4 years, and more precisely, every 210,000 blocks of transactions. As the name suggests, each one cuts the amount of Bitcoin miners receive per block reward in half. For miners, obvious...

The Future of Instant Payments: Which Cryptocurrency Will Take the Lead?

One of the reasons why digital tokens became popular in the first place is the ease of use. You are able to go to a cryptocurrency exchange like this one and convert them, make transactions in just a few clicks, and there are no banks and other middlemen that can complicate the process. However, instant payments are not something synonymo...

Why is ETC (Ethereum Classing) going up so fast at the moment? - The Callisto Project

Callisto Project is coming up on March 5 2018Quick summary:It is not a hard fork, it's an airdrop. The difference is there won't be a shared history.Both chains will continue to exist.Those holding ETC at block 5.5 million (around March 5 2018) will receive an equivalent amount of CLO.If you want your CLO the safest bet is storing your ET...

Game-changer for Litecoin to be released

A "GAMECHANGER" for Litecoin will be released later this month with businesses expected to be able to accept the cryptocurrency "without worrying about price volatility", a financial expert has warned.Charlie Lee, Litecoin founder and former director of engineering at Coinbase, says transaction processor LitePay will be released on Februa...

Litecoin vs Bitcoin

Litecoin vs BitcoinLitecoin vs Bitcoin. Which one is better? Everyone from qualified economists to Redditors have been comparing the two since Litecoin came into existence in 2011.The conversation not only discusses these coins individually and against each other, but also pertains to a more complex debate over what it takes to become a s...

Trading Glossary

Bearish: An asset is bearish if the price is set to fall according to certain indicators or rules, or a person is bearish if he thinks that the price of an asset will decline. Bullish: An asset is bullish if the price is set to rise according to certain indicators or rules, or a person is bullish if he thinks that the price o...

An Introduction To Crypto

What is Crypto? A Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Note: Not all 'Crypto' companies are currencies. Many of them offer other services and their 'Currency' is actually...

The Cause of Today’s Chaos in Crypto Market

The cause of today’s chaos is likely large hedge funds using expiring BTC futures contracts as safety nets to exploit the only sure-thing in this market: a large amount of new/overextended investors who are easily moved to panic sell during a flash-crash.On December 10, BTC futures trading went live. The first set of those contracts is se...