How to Use Moving Average
Moving averages are very popular because of their ease of use and many uses when trading. However, there are a number of popular simple moving averages, each of which will be determined by your trading style and desired time frame when trading. Smaller and faster simple moving averages as entry triggers and longer and slower moving averages as clear trend filters.
Moving averages are easy to use and effective in identifying trends, ranges, or corrective environments. Often traders will use more than one moving average because two moving averages can be used as trend triggers. In other words, when the moving average is longer and slower, it can be seen as a signal to enter a long position. The long trading bias remains until the moving average reverses direction or the target is reached.
Moving averages are the most popular among new traders, for good reason. This indicator helps traders to determine the trend and potential entries to the direction of the trend. However, moving averages are also used by investment managers and investment banks in trader analysis to see if the market is approaching support or resistance or has the potential to reverse course after a significant period.
Moving averages can be a simple tool for determining support and resistance in the forex market. When the market is in a strong trend, any bounce off the moving average presents an opportunity to follow the trend until price closes below the 200 simple moving average. However, if price continues to move above and below the moving average for a short period of time, this is likely to be a range, which means the reversal is less significant from a trading point of view.
How to Use Moving Average
There are many uses for the popular moving averages but a simple system should look for moving average crossovers. Moving average crossovers look for a shorter or faster moving average to pass above a moving average that has been rising longer or slower as a buy signal. When looking to sell a currency pair, traders can look for a shorter or faster moving average to cross below the slower moving average as a sell signal.
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