Application of single moving average

1.MA5

The MA 5, also known as the “attack line,” displays the currency price’s short-term moving trend. The moving direction of MA 5 depicts the direction of the price, while its angle reveals the range of the change.

In trading, MA 5 can be used as below:

1. If the currency price increases in the mid-to-long-term rising trend and breaks the MA 5, it signals the end of the mid-to-short-term sideways trend, and it is a good time to go long at the current moment.
2. If the currency price keeps increasing quickly along the MA 5 in the upward trend, it indicates that the price is on a strong rise and traders should hold onto their positions.
3. If the currency price rises swiftly along MA 5 first and then falls, the moment it goes below MA 5 is the time to liquidate short-term positions and deleverage medium- and long-term positions.
4. When the extremely weak currency rises above the MA 5 following a sharp decline along the MA 5, it is time to open short-term positions to profit from the price rebounce. However, position size must be controlled, and the interval between the opening and closing of position should not be too long. The first time to close the position (set a stop loss) should be when the currency price once more drops below the MA 5.

Notes:

When using MA 5, traders should keep in mind that:

1. Sharply angled MA 5 can deliver more precise signals. Useful MA 5 must be those that run at a sharp angle, indicating that the currency’s price is changing widely, whether in an upward or downward trend.MA 5 in a gentle flow is less effective in forecasting market patterns.
2. The MA 5 should only be used when there is an obvious mid- to long-term upward or downward trend in the currency price, and the price of the currency is rising or decreasing in line with the MA 5.

2.MA 30

MA 30 works similarly to the monthly chart in that it displays the currency’s medium-term price trend. When compared to MA 5, it fluctuates in a smaller range and at a lower frequency, resulting in greater stability. In trading, MA 30 can be a useful reference for swing traders. MA 30 is applied as follows:

1. If MA 30 rises when the price is trending upward, and the currency price goes up to break MA 30, it indicates that the mid-term sideways trend has ended, and now is the time to buy.
2. ​​​​​​When the price is heading upward, MA 30 keeps increasing. The currency’s price grows in line with the MA 30, and even if it may sometimes fall, it will always rise again before it reaches the MA 30. Traders are advised to maintain their current positions in such a situation and not sell or buy.
3. In an upward trend of currency price, when the price of currency keeps rising along the MA 30, and then falls below the MA 30, it is time to close short-term positions, and significantly deleverage your medium- and long-term positions. If the MA 30 turns downward at the same time, it indicates mid-term sideways fluctuations may ensure and traders must consider closing their positions to avoid the possible loss, including the medium and long-term positions.
4. In a currency price downtrend, if the weak currency, which has been sliding along the MA 30, suddenly turns upward to break the MA 30, traders can buy assets right away to benefit from the price rebounce.

3.MA 60

The MA 60 indicates the middle-term price trend and reflects the closing average price and average cost in the past three months. The MA 60’s movement direction represents the direction of price change, while the angle reveals the range of such change.

MA 60 indicates the middle-term price trend. It works like the below:

1. MA 60 displays medium- and long-term trend, and it works best when combined with the daily K-line. It can provide precise and timely signals while being less fluctuant than a short-term-based MA and thus striking the ideal balance between efficiency and stability.
2. Non-professional traders who are unable to closely monitor market movements may find MA 60 useful in determining when to sell or purchase. The operation is even easier than the strategy of waiting in line to open long positions or liquidate short positions. The rules are like this:
   1. Opening positions are advised when the currency price rises to break the MA 60 and then runs above the MA 60;
   2. Reduce the position when the currency price rises along the MA 60 and begins to level off. When the price of the currency drops below the MA 60, it is time to sell the assets to close the position;

Notes:

1. The MA 60 reflects market changes with accuracy, stability, and responsiveness. Although its primary purpose is to reveal mid-term price movement, the direction it shows generally indicates the prevailing direction of the price change on a long-term basis.
2. When the currency price breaks through or falls below the MA 60 after it runs in a one-sided trend for a long time, trend traders should start to note the change in the direction and angle of the MA 60, which are of significant reference for them to choose the timing of trading.

4.MA 120

MA 120 reflects the long-term trend of the market and reveals the average cost of position holding for half a year. If the price of currency runs above the MA 120, it means that long-term traders favor it and have confidence in it for certain reasons. In trading, MA 120 works like in below:

1. Reveal the long-term trend in currency prices. MA 120 depicts the average cost of positions over a six-month period and always goes in the same direction as the market’s long-term trend;
2. The MA120 is an important pressure level and support level;
3. There is a phenomenon of moving average bonding on the MA120. When the currency price breaks through the bonding pattern, the currency is a strong currency and can be bought at an opportunity.

5.Summary

This article primarily introduces the use of various MA to forecast price trends in trading, including MA5, MA30, MA60, and MA120. In particular, traders should pay close attention to the MA60, which can be extremely helpful in determining medium and long-term market trends. When the price of a currency crosses the MA60, it always denotes a change in the medium and long-term market direction.

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Disclaimer

This article is for informational purposes only and does not constitute any investment advice, nor is Gate.io responsible for any of your investments. Content related to technical analysis, market judgment, trading skills, and traders’ sharing cannot be used on an investment basis. Investment may involve potential risks and face uncertainties. This article does not contain or imply any guarantee for returns on any type of investment.