OK the first technical analysis technique that I'm about to share with you in this course is the exponential
moving average.
This is a very powerful technique that can LPU instantly determine if a cryptocurrency will go up or
down in the near future.
Sounds interesting right in terms of definition a moving average is a technical indicator that displays
the price of a security over a set period of time.
It helps move the price data to form a trend following indicator.
There are different types of moving averages.
The two basic and commonly used moving averages are the simple moving average or SMK and the exponential
moving average or EMJ the exponential moving averages similar to a simple moving average.
The only difference is that this type of moving average reacts much faster to recent price changes than
a simple moving average.
That is to say it focuses more on recent price action.
So can help us a lot better in predicting how the price will move in the future.
I think it works better in a volatile market like the cryptocurrency market as you can see the crypto
market is very volatile.
Prices fluctuate wildly over time.
So for a more precise analysis we need to give more weight to recent data and that's why for trading
cryptocurrency we'll use the exponential moving averages instead of simple moving averages.
Here's what the exponential moving average looks like.
As you can see on the screen the blue line is the nine day exponential moving average.
The red line is the 20 day EMJ and the orange line is the EMJ 50.
So how can we use these lines to spot market trends.
There are two ways that you can use exponential moving averages.
The first one is to use the moving average crossover strategy to determine market trends how this strategy
works is simple.
We simply use to exponential moving averages EMJ 9 and EMJ 20 and wait for the faster line to cross
above or below the slower line.
The faster line is the nine day EMJ and the slower line is the 20 day EMJ.
So here's an up trend signal.
When the nine day EMJ crosses above the 20 day EMJ and both lines are sloping upward This means there's
an up trend.
Chances are your coin's price will go up in the near future.
So in this case you can follow the trend in place of buy order when the price increases you'll make
a profit.
Simple right.
And when the EMJ 9 crosses below that EMJ 20 and both lines start sloping downward.
This is a downtrend signal.
Chances are your Goines price will go down in the near future and you'll want to sell your coin before
the price drops further to protect your money.
And when that trend reverses or when the EMJ 9 crosses above the EMJ 20 and both lines start sloping
upward again will consider making another investment because we know that the price will go back up
soon.
So we simply buy low and sell high and we'll keep doing this again and again and again and you can make
a lot of money by just buying low and then selling high OK.
The second strategy is to use a 50 day exponential moving average as a dynamic sport or resistance.
Here's what you need to take into account when prices are above the EMJ 50 this moving average can act
as a support that helps push the price up.
So this means when prices cross above the 50 day EMJ the uptrend signal will be stronger and there will
be a high chance that the price will go up soon.
And when prices are below that EMJ 50 moving average can act as a resistance that prevents the price
from rising up.
So when you see prices crossed below that EMJ 50 This means the downtrend signal is stronger and you
can be confident that the downtrend will happen very soon what you can do now is to get out of the market
as soon as possible to protect your money.
If you still have no idea about how these strategies work.
Don't worry.
We'll dive into a lot of examples in the next lecture
OK.
Now let's talk about what chart time frames you should use to implement this strategy.
From my own experience the best thing about this strategy is that it works on any chart you use.
If you're a long term investor in your investment horizon is from several weeks to several months or
even one to two years you can use daily charts and when you're a long term investor your risk will be
much lower.
If you're a medium term investor in your investment horizon is from several days to several weeks you
can use both hourly and daily charts.
But remember there's no low risk option when it comes to cryptocurrency trading as the market is very
volatile.
And if you're a short term trader and you want to continuously buy and sell crypto currencies you can
use 15 minute and hourly charts.
But I don't recommend you day trading cryptocurrency because the market price fluctuates wildly over
time.
So you can lose your money very quickly.
If you want to be a highly profitable cryptocurrency investor what I recommend is that you focus 80
percent of your time money and energy into long term investments and 20 percent in mid-term investments
and make sure you stay away from day trading unless you master all technical trading techniques and
you can afford to lose your money.
Long term investments can be some standard crypto currencies like Bitcoin a theory or Ripple and some
new promising coins mid-term investments can be other coins that you find that their value will potentially
increase in the future.
And for the sake of your money safety make sure you stay away from trading pump and dump coins or coins
that increase 50 percent or even 500 percent in value in the last 24 hours.
OK before we dive into a lot of examples let's learn how to set up the indicator in trading view and
other trading software.
First of all you'll need to add three exponential moving averages in trading view.
You can click indicators then type moving average here.
As you can see on the screen we have moving average exponential here.
Simply click on it three times to add three EMJ line.
The next thing we'll do is to change the EMJ periods to 9 20 and 50 respectively.
Now click on the gear button will change this line's color to blue.
You can use any color you like and then click on the input tab will change the first EMH period to 9
will do the same for the other lines.
Now click on the gear button again will change the length to 20
and then click on the style tab and change the lines color to red will do the same for the third EMJ.
Now click on the gear button again and change the lines color to orange and change the EMJ period to
50.
Now we have three different exponential moving averages.
The blue line is the 9 day EMJ the red line is the EMJ 20 and the orange line is the EMEA 50 and make
sure you don't skip the next video because we're going to dive into a lot of examples.