Moving average weight is a trend following indicator.
As a trend following indicator, moving average weight was created to help traders to know the direction of the market, that is whether the market is trending upwards or in a downwards market direction. This makes it to be based on bullish and bearish market condition.
Moving average weight normally places more weight on recent price and less weight on previous price.
Moving average weight is considered to be more significance than simple moving average since it follows direction of the market more closely as compared to simple moving average.
Moving average weight normally gives the weight average of the last price with a decreasing order thus the formula is derived as follows;
Let say that the last weight average price is n, then we will have
moving average weight = (P1*n)+(P2* n-1)+(P3* n-2)+(P4* n-3)/{(n)+(n-1)+(n-2)+(n-3)}
where P is the price and n is the weight average price.
Therefore, since moving average weight is based on bullish and bearish market, it therefore follows that when the market is in an upward trend, the moving average weight curve will also be trending upwards while when the market is in a downward trend, the moving average weight will also be trending downwards. Therefore, moving average weight can further be explained based on bullish and bearish cryptocurrency market as follows;
1.Moving average weight bullish cryptocurrency market
Therefore,if the moving average weight is moving downwards the market will also be moving downwards. If the price in the market falls below the lowest low point of the moving average weight, that will be an indication of a support point over there. This will signals the cryptocurrency trader to purchase a given amount of cryptocurrency with their USDT balance since the market will reverse and start moving upwards as the moving average weight. 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 his limit buy order price. This is indicated as from below;
The above is the TRX market against USDT. Two points are being indicated. There is point A and point B. Point A is the Moving average weight curve while point B is the support point. Before point B, the market and the moving average weight curve can be seen to be moving in the same direction downwards. The price in the market then falls below the lowest low point of the Moving average weight thus signaling the trader of support point over there. The cryptocurrency trader can purchase a given amount of TRX with his USDT balance. The trader can either place a market buy order which will be executed instantly or a limit buy order which will be processed when the market reaches his 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.Moving average weight bearish cryptocurrency market
Therefore,if the moving average weight is moving upwards, the market will also be moving upwards. If the price in the market rises above the highest high point of the moving average weight, that will be an indication of a resistance point over there. This will signals the cryptocurrency trader to sell a given amount of cryptocurrency which he had previously purchased and is currently holding to avoid declining the value of his trading account since the market will reverse and start moving downwards as the moving average weight. 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 his limit sell order price. This is indicated as from below;
The above is the TRX market against USDT. Two points are being indicated. There is point A and point B. Point A is the Moving average weight curve while point B is the resistance point. Before point B, the market and the moving average weight curve can be seen to be moving in the same direction upwards. The price in the market then rises above the highest high point of the Moving average weight thus signaling the trader of resistance point over there. The cryptocurrency trader can sell a given amount of TRX which he had previously purchased and is currently holding to avoid declining the value of the account. The trader can either place a market sell order which will be executed instantly or a limit sell order which will be processed when the market reaches his 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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