Trading cryptocurrency market using least square moving average
Least square moving average is also called linear regression moving average. Least square moving average is a trend following indicator. Just like in other moving average indicators, least square moving average is also used to indicate the direction of the market, that is whether the market is trending upwards or downwards.Least square moving average is based on bullish and bearish market as well as support and resistance. Least square moving average is therefore calculated using the following formula; LSMA= h*t+b where as
h={(nΣtixi ) - (ΣtiΣxi)}/{(nΣti)-(ΣtiΣti)}
b=1/nΣxi-h*1/nΣti
while t is the time and n is the period Since least square moving average is a trend following indicator and is based on bullish and bearish, it therefore follows that when the market is in an uptrend movement,the least square moving average will also be moving upwards while when the market is in a downward trend, the least square moving average will also be moving downwards.This can further be explained as follows
1. Least square moving average bullish cryptocurrency market
Since least square moving average is a trend following indicator, it therefore follows that when the price in the market is moving downwards, the least square moving average will also be moving downards. When the price in the market falls below the lowest low point of least square moving average when the two are moving downwards, an upward reversal movement will take place. This will signal the cryptocurrency trader of a support point over there thus signalling them to purchase a given amount of cryptocurrency with their USDT balance. The trader can either place a market buy order which will be processed immediately or a limit buy order which will be processed when the market reaches their limit buy order price. This is indicated as from below;
The above represents the TRX market against USDT. Two points are being indicated. There is point A and point B. Point A is the least square moving average while point B is the support point. Before point B, the market and the least square moving average were moving downwards. At point B, the price in the market falls below the lowest low point of the least square moving average thus creating a support point over there. This signals the cryptocurrency trader to purchase a given amount of TRX with their USDT balance since an upward reversal movement is starting to take place. The trader can either place a market buy order which will be executed immediately or a limit buy order which will be processed when the market reaches their limit buy order price. When the order is being processed, the account of the trader will start increasing in value in terms of USDT.
2. Least square moving average bearish cryptocurrency market
Since least square moving average is a trend following indicator, it therefore follows that when the price in the market is moving upwards, the least square moving average will also be moving upwards. When the price in the market rises above the highest high point of least square moving average when the two are moving upwards, a downward reversal movement will take place. This will signal the cryptocurrency trader of a resistance point over there thus signalling them to sell a given amount of cryptocurrency which they had previously purchased and is currently holding to avoid declining the value of their trading account. The trader can either place a market sell order which will be processed immediately or a limit sell order which will be processed when the market reaches their limit sell order price. This is indicated as from below;
The above represents the TRX market against USDT. Two points are being indicated. There is point A and point B. Point A is the least square moving average while point B is the resistance point. Before point B, the market and the least square moving average were moving upwards. At point B, the price in the market rises above the highest high point of the least square moving average thus creating a resistance point over there. This signals the cryptocurrency trader to sell a given amount of TRX which they had previously purchased and is currently holding to avoid declining the value of their trading account. The trader can either place a market sell order which will be executed immediately or a limit sell order which will be processed when the market reaches their limit sell order price. When the order is being processed, the account of the trader will have increased in value in terms of USDT.
cryptocurrency market is a highly volatile market. As a cryptocurrency trader,whenever you place a buy order,always make sure to apply risk management so that whenever your buy order goes against you, your account do not depreciate so much in value.
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