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How to Trade Using Moving Average Indicators
Moving average, also known as the rolling or running average. The moving average is definitely one of the more advanced topics of forex because it’s at heart of the technical analyses. The Moving Average Indicator is also the one indicator that every trader, whether novice or professional, will probably use at one time of his trading career.
What does the Moving Average mean?
The Moving (or Rolling or Running) Average is an indicator that indicates the average value of a currency’s price over a set value. This is in fact not the Moving Average definition that is normally used but one that is suitable for the forex moving average. The MA or Moving Average can be used in any statistical science field and is not just limited to the FX moving average.
What are the Moving Average types?
There are 4 well-known Moving Average indicators types:
- SMA: Simple Moving Average
- EMA: Exponential Moving Average
- Smoothed Moving Average,
- LWMA: Linear Weighted Moving Average.
How you can trade with the help of Moving Average Indicators:
If we were to discuss the whole topic of how to use the rolling average as a forex indicator, we would need to cover hundreds of pages, and we will only briefly cover Moving Average usage in this article. The important rule to keep in mind is that “Where there’s a trend there’s a Moving Average” which explains that the MA functions better in the trend market and it doesn’t work so well during times of market fluctuations.
Moving Average Breakout is a method in which we need to plot a MAI on the chart (for example 24 hrs LWMA on EURUSD Hour chart). We purchase when the price have crossed MA down-up and there is a total candlestick above the MA indicator. We well when the price have crossed MA up-down and there is a total candlestick below the MA indicator.
Rolling Average Crosses: In this method we need two plus Rolling Average Indicators. The first 1 will be set with a tiny period, and the 2nd 1 will be set with larger period. For example ten days EMA and eighty days EMA on EURUSD Daily chart.
When the Fast Rolling Average has crossed over the Slow Rolling Average down-up, we buy.
When the Fast Rolling Average has crossed the Slow Rolling Average up-down, we sell.
Running Average Channel: In this trading method we use 2 Running Average Indicators which could not really cross each other. These Running Average indicators will plot upper and lower boundaries of the channel.
When the price cross and a total candlestick is above the channel’s upper boundary, we purchase.
When the price cross and a total candlestick is below the channel’s lower boundary, we sell.