Crypto Trading 101: The Moving Average Crossover

If simple moving averages are your game as a crypto-trader, it's time to take it to the next level for this week's Crypto 101 guide.

Moving on, the SMAs we discussed previously tend to move in relation to a set of data over a specified period of time, plotting a line on the chart that illustrates whether or not a trend is bearish or bullish - as well as the momentum behind certain price moves.

A moving average crossover occurs when two or more moving averages cross paths, confirming a shift in the market trend.

There are two simple moving averages "Crossing over" on multiple occasions, whereby the faster SMA passed over or under the slower one, thus confirming a bullish or bearish signal.

There are different types of moving averages - simple, smoothed and exponential - that can work for you depending on the time-frame and asset.

The critics of the moving average crossover strategy often point out that it is a "Lagging indicator," meaning it lags price or happens after a certain price move has appeared.

Moving averages consider historical data and the longer the period of the moving average, the more it tends to fall behind price.

The much-feared "Death cross" or the bearish crossover between the 50-day SMA and 200-day SMA is considered by many as a "Contrarian indicator," meaning that by the time the positive crossover is confirmed, a major part of the rally has already happened, leaving the market vulnerable to profit-taking.

On similar lines, the"Death cross" or the bearish crossover between the 50-day SMA and 200-day SMA is a big-time lagging indicator and often works the other way around.

The 5-day and 10-day MA crossover strategy is widely used for short-term trading.