Monday, 13 February 2017

Are Moving Averages Really Simple To Use

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Are Moving Averages Really Simple To Use

How To Trade Forex With Moving Averages

Are moving averages really simple to use to trade forex? Read this forex blog from forex friend loan about are moving averages really simple to use. Moving averages are great if you know how to use them. Moving averages are used by amateur and professional traders alike for very rewarding results.

Finding moving average indicator that works for you might be a difficult task, but after finding the “perfect pair,” moving averages provide huge results with little work. Master the identification and use of moving averages and anticipate a long career in trading.

Moving Averages Can Make Up A Whole Trading Strategy
Many profitable traders have built proven strategies around a few moving averages. Whether in an uptrend or downtrend, moving averages are a great way to identify the major trend while placing positions that are set for the highest profits.

Moving averages can be used in a variety of ways. Many professional traders use moving averages to smooth out a price over the long term to ascertain a reasonable price, while others use a combination of averages to find when the market is entering a reversal. Regardless of the technique, moving averages provide for great profits when combined with other day trading strategies.

Moving averages are some of the easiest technical indicators to use because they are the easiest to understand and can be used in practically any market type: uptrend, downtrend or sideways trend.

Why Use A Moving Average?
Moving averages are simply a mathematical calculation of the average market price over the X amount of days preceding the current bar. Essentially, the calculation is just a “running average” of the price for comparison to the current price or other average prices for the long term.

The moving average is a trading indicator used to smooth the price action on the chart. The moving average indicator takes into account a number of periods when calculating its value. These periods could be adjusted, which also modifies the appearance of the line on the chart. The more periods it takes into consideration, the smoother the line.

Let’s say we wanted to calculate the 5-period moving average for the following values:


The 5-period simple moving average would equal:

(3+4+8+10+12)/5 = 7.4

Each time a new period appears on the chart, the formula is recalculated.


What Is The Best Moving Average? EMA or SMA?
In the beginning, all traders ask the same questions, whether they should use the EMA (exponential moving average) or the SMA (simple/smoothed moving average). The differences between the two are usually subtle, but the choice of the moving average can make a big impact on your trading. Here is what you need to know:

The Differences Between EMA and SMA
There is really only one difference when it comes to EMA vs. SMA and it’s speed. The EMA moves much faster and it changes its direction earlier than the SMA. The EMA gives more weight to the most recent price action which means that when price changes direction, the EMA recognizes this sooner, while the SMA takes longer to turn when price turns.

Many Different Ways To Use Moving Averages
Moving averages work when a lot of traders use and act on their signals. Thus, go with the crowd and only use the popular moving averages.


Traders have adopted many creative techniques for use with moving averages. They can be used as a trendline, showing both support and resistance, or to show just a basic average price. Moving averages are also used by some professional traders as a cross to show when the market is ready for an uptrend or downtrend after a long time in a sideways trend.

The Best Moving Average Periods
Moving average that is fast and reacts to price changes immediately. That’s why it’s usually best for day-traders to stick with EMAs in the first place.

When it comes to the period and the length, there are usually 5 specific moving averages you should think about using:

7, 9, 10 and 11 Periods
Very popular and extremely fast moving. Often used as a directional filter (more later)

20 and 21 Periods
Medium-term and the most accurate moving average. Good when it comes to riding trends

50 Period
Long-term moving average and best suited for identifying the longer term direction

100 Period
There is something about round numbers that attract traders and that definitely holds true when it comes to the 100 moving average. It works very well for support and resistance – especially on the daily and/or weekly timeframe

200 and 250 Periods
The same holds true for the 200 moving average. The 250 period moving average is popular on the daily chart since it describes one year of price action (one year has roughly 250 trading days)

Finding a cross pair of moving averages can be difficult, but not impossible. My personal experience
as a forex trader, cross pairs like 7 SMA and 21SMA work well for me on a higher timeframe.

A trader first needs to find two moving averages that move together to show the high and low points of a chart. Good moving averages, when crossed, will alternate between buying and sell signals. Finding a good pair usually includes using a moving average between 2 and 20, coupled with another moving average between 21 and 100. Profitable traders utilize a moving average cross between a small number and a much greater number to show short-term reversals against the long-term trend.

All Traders Should Use Moving Averages
Whatever the application, moving averages deserve a spot on a trading platform. Many traders have luck using trendlines as a way to show long-term trends, while others use them as a way to find reversals and key resistance. Either way, moving averages really are simple to use both for amateurs and professional traders alike.

Are Moving Averages Really Simple To Use