Trading with the 20 & 100 Simple Moving Averages (SMA)
The Simple Moving Average (SMA) is a powerful trend-following tool that helps traders identify buy and sell opportunities. In this chart, we use:
SMA 20 (Purple Line) → This moving average represents the average price of the last 20 candles. Since it reacts quickly to price changes, it reflects short-term momentum and helps identify early trend shifts.
SMA 100 (White Line) → The 100-period SMA smooths out price action over a longer timeframe, reducing noise and showing the overall market direction.
Trading Strategy: The Golden & Death Cross
✅ BUY Signal: The SMA 20 crosses above the SMA 100 → This is called a Golden Cross, and it indicates that recent prices are rising faster than the long-term trend, suggesting a shift toward bullish momentum. Traders see this as a buying opportunity since short-term demand is increasing
❌SELL Signal: The SMA 20 crosses below the SMA 100 → This is called a Death Cross, and it shows that recent prices are dropping below the long-term trend, signaling a potential bearish market shift. This suggests that sellers are taking control, increasing the likelihood of a downtrend.
By using moving averages, traders can filter out market noise and trade with confidence.
SMA 20 (Purple Line) → This moving average represents the average price of the last 20 candles. Since it reacts quickly to price changes, it reflects short-term momentum and helps identify early trend shifts.
SMA 100 (White Line) → The 100-period SMA smooths out price action over a longer timeframe, reducing noise and showing the overall market direction.
Trading Strategy: The Golden & Death Cross
✅ BUY Signal: The SMA 20 crosses above the SMA 100 → This is called a Golden Cross, and it indicates that recent prices are rising faster than the long-term trend, suggesting a shift toward bullish momentum. Traders see this as a buying opportunity since short-term demand is increasing
❌SELL Signal: The SMA 20 crosses below the SMA 100 → This is called a Death Cross, and it shows that recent prices are dropping below the long-term trend, signaling a potential bearish market shift. This suggests that sellers are taking control, increasing the likelihood of a downtrend.
By using moving averages, traders can filter out market noise and trade with confidence.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.