The 20-period Exponential Moving Average is a short-term trend-type indicator line for the technical analysis of the chart price of an asset. Recognized for its quick reaction to price fluctuations at the time that smoothes them, this line reveals to traders the underlying trend of the market for potential trading opportunities acting as a trendline for dynamic support and resistance.
By its part, The 50-period Exponential Moving Average features a more mid-term approach to price fluctuations that balances the responsiveness ability. The 50 EMA reaction is slower than the shorter periods but offers more reliance on the smoothened price data.
The 200-period EMA is a more long-term proposal popular among crypto traders buying coins in the spot market to hold them at the assumption of a potential uptrend and rising asset value. Of course, this period can also feed the speculative ambitions of shorter-term traders.
The 20 EMA For Shorter Time Frames: Pursuing Market Swings
A simple strategy based on the 20 EMA might be a trend-follow approach. In the pursuit of the price action, while it pushes decisively in a direction, the 20 EMA strategy will help identify upcoming market swings in the short term as the EMA acts as a trendline.
The idea is to engage with the trend as long as it continues the same path, making entries in the coming swings in favor of the prevailing direction:
- Scalpers can find entry points in the 2-minute and 5-minute charts across various price swing opportunities.
- Day traders can find entry points in the 15-minute or 30-minute charts for the major price movement of the day.
Learn more about EMA crypto trading strategy at Altrady!
EMA 50 and the H1 Chart
This EMA is valuable in identifying meaningful trends. The more smoothened price data resulting from this EMA period can suggest zones of strong support and resistance whose utility is enhanced when using longer period charts, especially the 1 hour.
Swing traders could benefit from this approach, as well as day traders who look for substantial movements within a day session. The idea consists of:
- Looking for a breakout of the EMA. Typically, this type of scenario anticipates a big price movement.
- Spotting zones for relevant support and resistance that could bounce or reject the price.
Assertiveness of EMA 200: The investor mindset
The longer the period of the EMA, the less susceptible to price movement. This characteristic adds more confidence to the analysis of long-term opportunities.
The core idea is:
- Using a 200-period EMA in time frames like H12 or Daily can suggest better prices for investment opportunities.
- A breakout of the 200 in any time frame can anticipate a prolonged price movement.
The EMA trio
Using 20, 50, and 200 EMA is a technique to confirm meaningful crossover opportunities. The idea is that a shorter period of EMA crossin’ above or below a longer period EMA is an indication of momentum: the beginning of a substantial price movement.
It consists of:
- Plotting the 3-period lines together in the chart.
- A cross of the 20-period over the 50 and 200 periods can indicate a major trend in the price. If the 20-period crosses above, the market is in an uptrend. Otherwise, the crossing below is in a downtrend.
Source: The Power of EMA 20, 50, and 200: Techniques and Reasons for Their Popularity Usage and Popularity!
Conclusion and Call to Action
The responsiveness of the 20 EMA has settled itself as a primary option for day traders and scalpers whose trading style tries to catch price movements within a trading day. 50 and 200 EMAs are a vehicle for mid-term and long-term opportunities. Using the three EMAs together will indicate meaningful trends taking action.
In Altrady you can use EMAs of all periods alongside multiple charting tools by signing up for a free trial account with paper trading.
