Does the confluence of the quarterly moving average mean a big market?

The quarterly moving average helps traders identify long-term crypto trends, and when combined with shorter MAs in confluence zones, it can signal strong entry points for potential market moves.

Jun 21, 2025 at 06:07 pm

Understanding the Quarterly Moving Average in Cryptocurrency

In the context of cryptocurrency trading, a quarterly moving average refers to a technical indicator that smooths out price data over a three-month period. Traders often use this metric to identify long-term trends and filter out short-term volatility. The moving average (MA) is calculated by summing up the closing prices of an asset over 90 days and dividing that total by the number of periods. This value updates daily, creating a line on a chart that reflects the trend direction.

The quarterly moving average serves as a key reference point for both novice and experienced traders. It helps determine whether an asset is in an uptrend or downtrend, especially when compared with shorter-term moving averages like the 20-day or 50-day MA.

What Does Confluence of Moving Averages Indicate?

When multiple moving averages converge — such as the 20-day, 50-day, and 90-day lines aligning closely on a chart — it's referred to as confluence. In technical analysis, confluence zones are areas where different indicators or tools point to the same support or resistance level, increasing the probability of a significant market move.

A confluence involving the quarterly moving average can signal potential momentum shifts in the market. For instance, if Bitcoin’s 20-day MA crosses above its 90-day MA during a consolidation phase, it might indicate the start of a new bullish trend. Conversely, a cross below could suggest bearish pressure building up.

• Support levels become stronger when multiple MAs align beneath the current price.
• Resistance levels gain significance when several MAs cluster above the current price.
• Volume surges around these confluence zones can confirm the strength of the potential breakout.

Historical Examples of Confluence Leading to Big Market Moves

Looking back at major rallies in cryptocurrencies like Bitcoin and Ethereum, many of them were preceded by a confluence of moving averages. For example, in early 2021, before Bitcoin surged past $60,000, there was a visible alignment between its 50-day and 90-day moving averages.

This alignment acted as a springboard for buyers who saw it as a strong entry zone. Similarly, during the 2023 bull run, Ethereum showed a similar pattern where the quarterly MA acted as a critical pivot point after a prolonged correction.

• During accumulation phases, smart money often uses confluence zones to enter positions quietly.
• Breakouts from these zones are often followed by strong volume spikes, confirming institutional participation.
• Traders who recognize these patterns early can position themselves ahead of large moves.

How to Identify and Trade Confluence Zones

To effectively trade confluence involving the quarterly moving average, you need a clear methodology. Start by plotting the 90-day MA alongside other commonly used MAs like the 20-day and 50-day on your charting platform.

Look for moments when these lines begin to tighten or overlap, especially near key psychological price levels. These zones often act as turning points in the market and should be monitored closely for candlestick patterns or volume anomalies that may precede a breakout.

• Use platforms like TradingView or Binance’s native tools to overlay multiple moving averages.
• Zoom into weekly and daily charts to see how the quarterly MA interacts with price history.
• Watch for bullish or bearish crossovers within the confluence zone to time entries more precisely.

Risks and Limitations of Relying Solely on Moving Averages

While the confluence of moving averages offers valuable insights, it’s not foolproof. Markets can remain sideways for extended periods, causing false signals. Additionally, external factors such as regulatory news, macroeconomic events, or exchange outages can override technical setups.

Relying solely on moving averages without incorporating fundamental or sentiment analysis can lead to losses. It's essential to combine technical tools with risk management strategies like stop-loss orders and proper position sizing.

• False breakouts are common in low-volume markets, so always wait for confirmation candles.
• Different cryptocurrencies react differently to the same technical setup due to varying liquidity profiles.
• Backtesting your strategy across multiple cycles can help validate its effectiveness.

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FAQ 1: How do I know if a confluence zone is strong enough to trade?

A strong confluence zone typically includes at least two or more moving averages overlapping near the same price area. Additionally, if that zone coincides with historical support/resistance levels or Fibonacci retracements, it increases its reliability. High trading volume around the confluence also strengthens the case for a valid trade setup.

FAQ 2: Can I use the quarterly moving average alone to make trading decisions?

It’s not advisable to rely solely on the quarterly moving average. While it provides insight into long-term trends, combining it with other tools like RSI, MACD, or volume indicators gives a more comprehensive view of market conditions and improves decision-making accuracy.

FAQ 3: What timeframes are best for observing confluence with the quarterly MA?

The daily and weekly timeframes are most effective for analyzing confluence with the quarterly MA. The daily chart offers detailed insights into short-to-medium term movements, while the weekly chart helps assess broader market structure and longer-term implications.

FAQ 4: Is confluence more reliable in certain cryptocurrencies than others?

Confluence tends to be more reliable in highly liquid assets like Bitcoin and Ethereum due to deeper order books and more predictable price action. In contrast, smaller altcoins may exhibit erratic behavior, making confluence less dependable without additional confirmation tools.