Moving Averages are trend-following indicators that smooth out price data over a defined time period. They help traders filter out short-term noise and identify potential support, resistance, and trend direction. The Simple Moving Average (SMA) gives equal weight to all periods, while the Exponential Moving Average (EMA) gives more weight to recent prices, making it more responsive.
Example:
If the 50-day EMA of Bitcoin crosses above the 200-day EMA, it signals a bullish trend (known as a “Golden Cross”). A downward crossover would suggest a bearish reversal.