EMA in trading coin and how to apply it effectively
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Many traders often choose the EMA line in trade coin. The EMA is a familiar indicator, easy to use, and especially effective when applied to trading coins; therefore, whether professional investors or new investors have the same choice to use the EMA indicator in the cryptocurrency market.
What is the EMA? Distinguish between EMA and SMA
Before learning about the EMA, we will familiarize ourselves with the Moving Average indicator (MA for short). The moving average is an indicator in the shape of a line chart that shows the average price over a certain period of time. The MA is commonly known with 2 types: SMA and EMA.
The SMA is a simple moving average. The SMA has a slow signal response, so short-term movements are often ignored. Therefore, SMA is used more with large timeframes and is suitable for long-term trading strategies, used more in the stock market.
The EMA is an Exponential Moving Average. The EMA shows short-term movements in the price chart. The cryptocurrency market always has many fast and strong fluctuations, so the ema line in trade coins is often used more effectively.
Experience using ema line in trading coin
The ema line in trading coin follows the trend
One of the most common mistakes short-term traders make is predicting future prices. However, if you’ve ever taken Investing’s Super Invertor course, you’re probably familiar with the instructor’s prompt: We can observe prices and set expectations but never attempt to predict prices. And explain it. And the EMA is one of the supporting tools to help traders more conveniently observe price trends to set expectations when trading.
Buy coins when the EMA rises.
When the price crosses the EMA from below, the EMA is showing an uptrend in that time frame. At that time, you can enter an order to buy coins. After entering a buy order, you can place a stop loss at the nearest low. After the price rises, you gradually raise the stop loss to new higher lows.
Sell coins when the EMA is falling.
Conversely, if the price crosses the EMA from the bottom, it means that the market identifies a downtrend in that time frame. You can execute a sell order when the nearest candle crosses the EMA and place a stop loss at the nearest top.
Do not trade when EMA is flat.
When the EMA is flat, the price continuously crosses the EMA, confirming sideways the market. It would help if you did not trade coins at that time, whether you enter buy or sell orders. Because when the trend is not clear, the trade will only make you continuously hit the stop loss.
Use 2 EMAs and combine other indicators to optimize efficiency when trading coins.
With some of the examples given above, you clearly find that trading coins following the trend of the EMA are quite effective. However, sometimes you feel that the trading efficiency is not optimal with only one EMA.
- You can choose 2 EMAs with 2 different periods to get more accurate trading signals.
- You can also combine with other indicators to filter out EMA noise signals and optimize trading efficiency.
How to enable EMA in trading coins on Binance?
To enable EMA on Binance, you need to log in to your Binance account.
You select the coin pair you want to trade, then click the [Technical Indicator] symbol.
Select the type of indicator you want to enable and select the appropriate parameters as you want, then press [Save].
The EMA is applied very effectively in trading coins. However, it would help if you chose the right cycle for your trading time frame. In addition, you should also combine 2 different EMAs with some other technical indicators to increase the efficiency of analyzing trading opportunities.