Overview of Ghost Road
The first thing everyone needs to learn is general knowledge about Moving average meaning , its concept, meaning, and classification.
What is Ghost Road? Meaning
Ghost road is an English abbreviation for Moving Average, which means moving average. The MA moving average is calculated by averaging the prices of trading sessions. Therefore, this line represents the fluctuations and price trends of cryptocurrencies over a certain period.
Moving Averages are a lagging indicator. Therefore, they do not have a predictive effect but are mainly used to track previously formed price movements.
Calculating the MA moving average is important in Crypto technical analysis. Specifically:
– The Moving Average line helps investors identify changes in market prices over a certain period. From there, it is possible to predict part of the price trend in the future.
– The direction of the Moving Average line helps investors predict the ongoing price trend.
If the Moving Average is sloping upwards, it means that the price is in an overall uptrend. Conversely, if the line is sloping downwards, it means that the price is in an overall downtrend. In the case of a sideways line, the price is likely to remain within a certain range.
– MA indicator is used to determine resistance and support zones:
If the majority of prices are above the Moving Average line, meaning the line is below the price line, the market is in an uptrend. At this time, the MA line acts as a support level. Conversely, if this line is above the price line, the MA acts as a resistance level.
Types of Ghost road in coin trading
There are three main types of Ghost road. These include simple moving averages (SMA), weighted moving averages (WMA), and exponential moving averages (EMA).
SMA line
The simple moving average is calculated by dividing the sum of the prices of the trading sessions within the selected time period by the number of trading sessions.
The calculation formula is simply expressed as follows:
SMA = (P1 + P2+ … + Pn) / n
This is the most commonly used moving average in coin trading techniques. This line reflects part of the investor’s psychology while eliminating short-term price fluctuations. From there, investors can detect long-term price traps. Relatively high reliability.
However, because the weighting of prices in Crypto trading sessions is the same, it reacts slower when the market fluctuates.
See more: Line EMA: the secret to every successful transaction
WMA Line (Linear Weighted Moving Average)
While the SMA considers all price weights equally, the WMA places more emphasis on higher frequency prices. This means that investors will pay more attention to price steps with large trading volume and at the same time pay attention to the quality of money flow.
The formula for calculating the linear weighted moving average is as follows:
WMA = 2 x [P1 x n + P2 x (n-1) + … + Pn] / [n x (n + 1)]
The advantage of this line is that it is quite sensitive to short-term price fluctuations. Therefore, investors can recognize market signals faster and more clearly. From there, they can adjust their trading strategies accordingly.
However, being too sensitive to short-term price fluctuations can also cause investors to make wrong judgments and fall into price traps.
Exponential moving average
The third type of moving average MA is the exponential moving average. The formula for calculating this line is as follows:
EMA = P x K + EMA(i) x (1-K)
In there:
P is the closing price of the market today
K is the smoothing factor. This factor is calculated using the formula: K = 2 / ( number of days in the EMA cycle + 1)
EMA(i) is the previous EMA value.
The advantage of the EMA indicator is that it is very sensitive to short-term fluctuations because the calculation formula contains an exponential function. This helps investors to grasp and react promptly. This line is suitable for swing traders and short-term investors.
However, because it is so sensitive, it can also fool investors with false signals.
How to use Ghost Road in crypto trading
There are 2 ways to use MA trading . Including trading when the Ghost Road is correlated with the price line and using the MA indicator to determine the trading time. The specifics of these 2 ways of use are as follows:
Use Ghost Road correlating with the price line
With this method, if you see that most of the prices are above Ghost Road, then the investor’s expectations are currently higher than in the previous period. At this time, the investor can buy as soon as the price cuts or the price gradually adjusts to the Ghost Road. On the contrary, when most of the market prices are below the Ghost Road, the investor’s expectations are lower. This shows that the market is in a downtrend. The investor places a sell order as soon as the price cuts down or when the price starts to turn back to the Ghost Road.
This trading strategy is relatively simple, even beginners can apply it. However, it has many false signals, causing noise, and also has a relatively high risk. Therefore, investors should combine it with candlestick charts or other indicators for analysis.
Use Moving Average to determine when to place an order
With this method, investors buy in the following cases:
– The SMA20 line is lower than the price line: This is a signal that the market will increase in price in the short term.
– The SMA50 or SMA100 line is lower than the price line: This is a bullish market signal in the medium term.
– The SMA20 line is higher than the SMA50, and the market will increase in price in the long term.
– The SMA20 line is higher than the SMA50 but higher than the price line: The market is in an uptrend.
Conversely, investors sell in the following cases:
– SMA line is higher than the price line: The market will decrease in the short term.
– SMA50 or SMA100 line is higher than the price line: The market is bearish in the medium term.
– SMA50 line is higher than SMA20 line: Long-term bearish market.
– The price line penetrates the Ghost Road: The market is at risk of falling deeply shortly.
See more: OKX: open an OKX account – Reputable crypto exchange
Some notes when using Ghost Road in coin trading techniques
You already know how to use the Ghost Road in coin trading. However, to be safer in the investment process, please remember the following notes:
– The Moving Average is calculated based on past data and has no predictive elements. Therefore, the effectiveness of using the MA indicator is difficult to predict. Especially in periods when the market is volatile, not following the principles of support, resistance, or market signals. Therefore, depending on each specific case, you should use the most appropriate indicator.
– The MA indicator can be used effectively in a market with a clear uptrend or downtrend. However, if the market is sideways, it will be less effective. Therefore, if you are evaluating this market, you should use other indicators for analysis.
– Moving average MA is divided into many types. The properties of the lines are the same but the formulas are different. Besides, each line has its advantages and limitations. Therefore, depending on the purpose of use, you should choose the appropriate type of line.
Finally, you should not use too many different Moving Average lines on the same chart. Because it will make you confused, not knowing which signal to trade according to accurately.
Conclude
The above article is the necessary knowledge about Ghost Road, its concept, usage, and important notes. You can refer to and use it in the process of investing in your coins. If you need to know any other information, you can refer to the Crypto Trading page.
FAQs
Is the Ghost Road displayed directly on the Crypto chart?
The MA indicator is displayed on the Crypto chart. You open it by accessing the coin you want to track. On the toolbar, click on “Indicator” and search for “Moving Average”.
What indicators can the Moving Average be used to calculate?
The Moving Average line can be used to calculate the MACD index through the formula:
MACD = EMA (12) – EMA (26)
In the form of a Moving Average MA line, which line is the smoothest and best?
Among the forms of Ghost Road, SMA is the smoothest line, has the best ability to predict market price trends, and causes the least noise.
