What is the 200 WMA in crypto ?
When it comes to crypto, one of the most important indicators is the 200 WMA. This indicator is used to track the long term trends in the market and help investors make better decisions.
WMA is the abreviation for Week Moving average.
This indicator was first introduced in the early days of crypto and has since become one of the most used indicators by investors.
In this article, i will try to describe as simply as i can this indicator that is often used by traders or analysts in crypto, in order to read graphs. If you are around crypto trading or investing for a bit, you might have heard about this term : 200 WMA.
What does that mean ? How to interpret this indicator, and how to use it to your advantage in crypto ?
Let’s dive into this !
200 WMA in crypto: What does that mean ?
The 200 WMA indicator is a weight moving average that is used to smooth out price action and help identify trends. The indicator is calculated by taking the average of the past 200 weeks closing prices.
In other words, this is the average price of the currency of the last 200 weeks. Here is an example to make it easier to understand.
Bitcoin, on the 28th of November, 2022 :
- Bitcoin is worth around 16 000 $
- The WMA is around 24 000 $
200 weeks is around 4 years of time. This indicator means that the average weekly price of Bitcoin for the last 4 years is 24 000 $.
Now that you understand what precisely this indicator is, let’s see how you can use it to your advantage.
200 WMA in crypto: How to use it to your advantage
The 200 WMA is a popular indicator among traders and investors as it can be used to identify both long-term and short-term trends. The 200 WMA is also a popular tool for detecting support and resistance levels.
When reading graphs, it is important to understand what support and resistance levels are.
Before reading this, please not that markets are highly influenced by traders, with huge amount of money. Because of their daily activity, trends and patterns can sometimes be detected.
- Support level : This is a price range where traders put buy order because they consider it worth buying a token. This is called support level because when it is reached, lots of buy orders will be automatically executed, creating a buying pressure, and theoretically rising up the price.
- Resistance level : Resistance level is the exact opposite. Sell orders have been placed on resistance level, in order to take profits. This is a price considered worth selling for traders. Consequently, when all of these sell orders are executed, there is a selling pressure, and price tends to fall afterwards.
Warning : These indicators are trying to detect tendencies in the market, but are not ways to predict the future. Be careful when using this as this is not 100% effective. This is a way to anticipate what’s “most likely to happen“, not what “is happening for sure“.
Any outside event as a big news in the medias (Elon musk tweet, discovering company solvability, hacks, world’s economy, war… etc) can have huge impact on these volatile markets and completely alterate these indicators. That’s why they can never be taken for 100 % granted as what’s going to happen.
Now that you understand this, let’s get back to our 200 WMA indicator.
How to read 200 WMA in crypto
What is intersting in 200 WMA is that it is a long term indicator. When trading, the less risky way to do it is to trade on long term. Because 200 WMA is about 4 years of numbers, i can help you understand how the market is moving on a long trend. Let’s take a concrete example :
On these graphs, we can clearly identify patterns. When Bitcoin dropped under 3000 $ in January 2019 Bear market, it reached the 200 WMA. Few months later, the market went on a Bull run. The exact same thing happened in March 2020. It was the beggining of the next Bull run that carried Bitcoin over 65 000 $.
In August 2022, we reached 200 WMA again, but the world’s economical situation made everything worse. world pandemic, war in Ukraine, world economical crisis severly impacted world’s markets, including Bitcoin.
However, if you truly believe in Bitcoin, and its value, now is the best opportunity to invest. No one can be sure if we’ve reached the bottom of the market, and when it’s going up again. But for any believer in Bitcoin, there will be brighter future and it will reward the most patient of us.
If you are unsure on how to invest in cryptocurrencies, one of the best way to do so is using the DCA strategy. It’s the safest strategy recommended by every invester. However, it is important to understand a few concepts before starting it. Make sure to read my guide to help you through this process :