Moving Averages: how traders catch trends

Moving Averages (Moving Average) is one of the most popular tools in technical analysis. It seems like a complex thing, but in reality, it's quite simple: it's the average price of an asset over a selected period.

What is really happening

Imagine: the price of BTC jumps back and forth every day like it's in a frenzy. The Moving Average takes these jumps and smooths them out so you can see the real trend, not the commotion.

Calculation examples:

• SMA10: take the last 10 closing prices, add them up, divide by 10 — done
• SMA50: the same, but over 50 days

That is, it is just arithmetic. Everyone builds charts, but the meaning is the same — to see where the price is moving.

SMA vs EMA: who is faster

Why do traders choose the exponential moving average (EMA) instead of the simple moving average (SMA)? Because EMA gives more weight to recent data. If the price jumps upward, EMA will notice it faster than SMA. In volatile markets, this is critical.

How it works in reality

Trend Identification:

• Price above Moving Averages + average looking up = rise trend
• Price below Moving Averages + average looks down = downtrend

Long periods (MA200, MA365) show the main trend, while short (MA10, MA20) catch short-term movements.

Support and Resistance: The price often bounces off the Moving Average like a ball off a wall. This doesn't always work, but in addition to other signals, it is a good level for orders.

The main thing to know

Moving Averages are lagging indicators. They do not predict reversals, they confirm them. Do not use them alone, combine them with other tools.

You can change the timeframe according to your strategy — there is no “right” period. The shorter the period, the more sensitive the average is to noise. Experiment and find your own.