MA (Moving Medium )
1. Basic concepts
A moving Medium (MA) is a technical indicator that smooths price movements by Medium the price over a period of time. Its main purpose is to identify the main trend of the market, eliminating short-term “noise”.
For example, MA20 is the Medium of the closing prices of the last 20 candles. If you are on the daily time frame, MA20 means the Medium of the last 20 days.
Example of moving Medium MA
2. Popular types of MA
There are two types of MAs commonly used:
SMA (Simple Moving Average) – Simple moving Medium : Calculates the Medium price over a period of time. Suitable for long-term trends.
EMA (Exponential Moving Average) – Exponential Moving Medium : Gives weight to recent prices. Reacts faster to price fluctuations, suitable for short-term trading.
According to the time of use, MA is often Chia into:
MA Type | Time period | Intended use |
MA10–20 | Short term | Used to catch short trends |
MA50 | Medium term | Identify overall trends |
3. How to use MA in trading
When the price is above MA → the market tends to increase .
When the price is below MA → the market tends to fall .
When the price cuts up MA → buy signal .
When price cuts down MA → sell signal .
MA Crossover Strategy:
Golden Cross : Short-term MA (eg MA50) crosses up long-term MA (eg MA200) → Strong buy signal .
Death Cross : Short-term MA cuts down to long-term MA → Strong sell signal .
Short-term MA (50) crosses above MA 200, indicating strong buying signal
4. Notes when using MA
MA works best in trending markets and is not suitable when the market is sideways.
It is recommended to combine MA with other tools such as RSI, MACD or price patterns to increase the reliability of the signal.
Use multiple MAs at the same time (eg: MA20, MA50, MA200) to evaluate the overall short-term - medium-term - long-term trend.
In technical analysis, Moving Medium (MA) is one of the most basic and important tools. MA helps smooth out price action, filter out noise and allow traders to easily observe the overall trend of the market.
There are two most common types of moving Medium that traders often use:
SMA (Simple Moving Medium )
EMA (Exponential Moving Medium )
Although they share the same purpose — measuring price trends over a given period of time — the calculation method and sensitivity to price fluctuations between SMA and EMA are different, leading to different practical applications.
⚡ SMA – Simple Moving Medium
SMA calculates the Medium price by adding all the prices over a period of time and Chia it equally.
SMA gives stable and low noise signals, but reacts slowly to sudden price changes.
Suitable for medium and long term trading, especially in strong trending markets.
⚡ EMA – Medium Moving Average
EMA also Medium prices but gives higher weight to the latest data.
EMA reacts faster to price movements, allowing traders to catch reversal signals or enter a trend earlier.
Suitable for fast trading strategies like day trading or scalping, especially in volatile markets like crypto or forex.
✅ Why do we need to understand SMA and EMA?
Choosing the right type of Moving Average according to your trading style (short term, medium term, long term) will improve your trading efficiency.
Smart combination of SMA and EMA helps to identify accurate trends, find optimal entry and exit points and better manage risks.
RSI (Relative Strength Index)
RSI is an oscillator that measures the speed and change of prices, helping traders determine when an asset is overbought or oversold. The indicator is calculated based on the Medium price increase and decrease over a certain period of time, most commonly 14 periods.
RSI is represented as a line that oscillates from 0 to 100.
When RSI > 70: The asset may be overbought, and a price correction may occur in the near future.
When RSI < 30: The asset may be oversold, and a recovery or bullish reversal is likely.
RSI indicator
However, it is important to note that RSI does not predict the exact time of reversal, but only gives warning signals of overbought or oversold conditions. Therefore, investors should combine RSI with other indicators or technical patterns to increase reliability.
In addition to the traditional 30 and 70 levels, some traders adjust these levels depending on the specific market or strategy:
RSI > 80 can signal extremely overbought levels in a strong uptrend.
RSI < 20 can signal extremely oversold levels in a strong downtrend.
One of the powerful applications of RSI is divergence signals:
Bullish Divergence: Price makes a lower Dip , but RSI makes a higher Dip → bullish reversal signal.
Bearish Divergence: Price makes a higher high, but RSI makes a lower high → bearish reversal signal.
RSI Divergence and Convergence Cases
RSI is especially useful in sideways markets, as it helps traders identify areas where prices are likely to bounce or reverse in the short term. However, in strong trending markets, RSI can remain in overbought or oversold territory for extended periods of time without a clear reversal. At this point, using RSI alone can be confusing.
Therefore, smart traders often use RSI as a signal confirmation tool instead of the main decision tool. Combining RSI with support - resistance, price patterns or other indicators such as MACD, Bollinger Bands will bring higher efficiency.
MACD (Moving Average Convergence Medium )
MACD is one of the most powerful and versatile technical indicators, helping to identify trends, measure momentum, and spot reversal signals. MACD is built from three main components:
MACD Line: Difference between EMA 12 and EMA 26 (MACD = EMA12 – EMA26)
Signal line: Is the 9 EMA line of the MACD line
Histogram: Is a bar chart showing the distance between the MACD line and the Signal line. Histogram helps visualize buying and selling force in the market.
Structure of MACD indicator
When applying MACD to technical analysis, you can read many different types of trading signals.
Signal Cross:
When the MACD line crosses the Signal line → this is a buy signal, indicating that an uptrend is forming.
When the MACD line crosses the Signal line → this is a sell signal, indicating that a downtrend is occurring.
The signal will be stronger if the crossover occurs near or right at the zero (0) line – the central axis of the MACD.
Using MACD indicator in technical analysis
Position relative to zero line:
MACD is above 0 → market is in uptrend.
MACD is below 0 → market is in downtrend.
Watching the MACD cross or fall below the zero line helps determine which overall trend is dominant.
Divergence signal:
Divergence between MACD and price is a potential signal of an impending reversal.
Bullish divergence: Price makes a lower Dip , but MACD makes a higher Dip → shows that selling pressure is weakening, the possibility of reversal increases.
Bearish divergence: Price makes a higher peak, but MACD makes a lower peak → signals that buying power is decreasing, the possibility of the market correcting down.
Positive divergence (convergence) and negative divergence of the MACD indicator
Some important notes when using MACD:
MACD has a lag because it is based on EMA (which is also a lagging indicator). Therefore, MACD should be used for trend confirmation rather than prediction.
In sideways markets, MACD often gives noisy signals. Limit the use of MACD in areas without clear trends.
Combining MACD with tools like RSI or trendlines will help improve the accuracy of the strategy.
Bollinger Bands
Bollinger Bands is a technical indicator developed by John Bollinger, used to measure price volatility and identify overbought and oversold areas. This indicator consists of 3 components:
Middle Band: Is a simple moving Medium (SMA), often using SMA20.
Upper Band: SMA20 + 2 standard deviations.
Lower Band: SMA20 – 2 standard deviations.
These bands expand or contract depending on market volatility. When the market is volatile, the Bollinger Bands widen. When the market is moving sideways, the Bollinger Bands narrow.
Structure of Bollinger Bands indicator
How to use Bollinger Bands in trading:
Identify overbought/oversold zones:
When the price touches the upper band, the market may be overbought, with a potential correction.
When the price touches the lower band, the market may be oversold and likely to bounce.
“Bollinger Bounce” Strategy:
In a sideways market, prices often fluctuate between the upper and lower bands.
Buy when price touches lower band, sell when price touches upper band.
This strategy works best when the market has no clear trend.
“Bollinger Squeeze” Strategy:
When the Bollinger bands narrow abnormally, it means that the market is in the accumulation phase, preparing for a big fluctuation.
After the squeeze, if the price breaks above the upper band, it could be a signal for the start of an uptrend.
If the price breaks below the lower band, it could signal the start of a downtrend.
Notes when using Bollinger Bands:
Bollinger Bands are not a predictive indicator, but a measuring tool. Its signals need to be confirmed by price action or other indicators such as RSI, MACD.
In a strong trending market, prices can “stick to the band” (stick close to the upper or lower band) for long periods of time, so don’t rush into an opposite order just because the price touches the band.
Bollinger Bands should be combined with support/resistance, candlestick patterns and volume for more accurate decisions.
