Mastering Crypto Future Trading: The Moving Average Strategy (Episode 5)

Welcome to the fifth installment of our Crypto Future Trading Course, powered by CoinSwitch. In our previous episodes, we’ve covered the fundamentals of future trading, funding rates, risk management, and the basics of support and resistance.

Today, we are diving into one of the most powerful and widely used technical indicators: Moving Averages (MA). Whether you are a beginner or a pro, understanding how to use moving averages can significantly refine your trade entries and exits.

What exactly is a Moving Average?

Think of a Moving Average like calculating the mileage of your car.

The Car Example: If you fill 26 liters of fuel and drive 450 km, your average is 17.30 km/liter. This tells you what to expect from your car based on past performance.
The Trading Reality: In technical analysis, we don’t look at fuel; we look at Candles. A Moving Average calculates the average price of an asset over a specific number of past candles (periods).

If you look at a 7-day Moving Average on a daily chart, the indicator adds the closing prices of the last 7 days and divides them by 7. As a new day begins, the oldest day is dropped, and the newest is added—hence, the average “moves.” On your chart, this appears as a smooth line that filters out market “noise.”

SMA vs. EMA: Which one should you use?

While there are many variations, two types stand out in importance:

Simple Moving Average (SMA/MA): This treats every candle in the period equally. It is straightforward but can be slightly slow to react to sudden price changes.
Exponential Moving Average (EMA): This gives more weight to recent prices. Because it focuses on what is happening now, the EMA reacts faster to price movements than the SMA.

Pro Tip: Traders often use a mix of both. The EMA is great for catching quick trends (aggressive), while the SMA is excellent for identifying long-term stability (conservative).

The Strategy: The “7/20” Cross-Over

For this strategy, we use two specific lines to identify high-probability trades:

7 EMA: Aggressive and fast-moving.
20 MA: A smoother, standard average to provide balance.

1. The Long (Buy) Signal

When the 7 EMA (fast) crosses above the 20 MA (slow), it indicates bullish momentum.

Wait for the Retest: Don’t jump in immediately at the cross. Wait for the price to come back and “test” the moving average lines.
Entry: If the price holds above the lines during the test, open a Long position.
Exit: Book profits when the lines start curving toward each other again.

2. The Short (Sell) Signal

When the 7 EMA crosses below the 20 MA, it indicates bearish momentum.

Wait for the Retest: Wait for the price to bounce back up to the moving average lines and get rejected.
Entry: Once the rejection is confirmed, open a Short position.
Exit: Close the trade when the gap between the two averages begins to close.

Example: Trading on a 4-Hour Time Frame

Imagine Bitcoin is trending upwards. You see the 7 EMA cross above the 20 MA.

Observation: Cross-over happens at $60,000.
The Test: Price dips slightly to $60,200, touching the 7 EMA but not falling below it.
The Trade: You enter Long at $60,200.
Risk Management: You set a Stop Loss at $58,700 (2.5% below). To maintain a healthy 1:2 Risk-to-Reward ratio, you set your take-profit target at $63,200 (5% gain).

The “E Mama” Indicator

On platforms like TradingView, the free version limits the number of indicators you can use. To solve this, you can use a custom-built tool:

Tool Name: E Mama
Function: This single indicator supports up to 8 different Moving Averages and EMAs (7, 20, 50, 100, 200, etc.) in one slot, saving you space and keeping your chart clean.

Final Words of Caution

No strategy is 100% foolproof. The secret to making money in future trading isn’t just the strategy—it’s Risk Management. Always know how much you are willing to lose before you think about how much you want to win.

Next Episode: Common mistakes in Crypto Future Trading.

Tools Discussed in This Lesson

Tool Type	Name / Detail	Purpose
Trading Platform	CoinSwitch	For executing future trades and adding technical indicators.
Analysis Software	TradingView	To view charts and apply the cross-over strategy.
Custom Indicator	E Mama	A customizable indicator that combines 8 MA/EMA lines into one.
Short-Term EMA	7 EMA	Used for aggressive, recent price trend tracking.
Medium-Term MA	20 MA	Used as a baseline for the cross-over strategy.
Long-Term Averages	50, 100, 200 MA	Used for identifying major trend shifts and strong support/resistance.

Practice Task: Open your chart, apply the 7 EMA and 20 MA, and look back at the last 10 crossovers. See how many would have resulted in a successful “retest and bounce” trade!

https://www.youtube.com/watch?v=ijc4UIdKmIk&list=PLqxS3nwsOSotFvuBOe_Qmw4HZeU04Oofk&index=2

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