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The Moving Average
The Moving Average is
probably the most popular Technical analysis indicator in the world. In simple
terms – A Moving Average
reflects the Average Closing Price of a market over a specific Number of
periods (candles).
Moving Averages (MAs) are primarily used for Trend
identification
- MA is Rising – Uptrend
- MA is Falling – Downtrend
- MA is Turning -Trend may be ending
- MA is Flat – Trend is weak
- MA is Steep – Trend is Strong
The secondary use for MAs is to define areas where
Price may encounter Support/Resistance. Different traders use different Moving
Average (Number Of Period) values, even those trading the same timeframe.
- Weekly – MA(50)
1 Year
- Daily – MA(20)
1 Month, MA(200) 1 Year
- Intraday – MA(4),
MA(9/10), MA(18/20), MA(40)
Although the above represent some of the more
popular settings it doesn’t mean any of them “correct”.
- Higher value MAs are considered “Fast” MAs
- Lower value MAs are considered “Slow” MAs
- Fast MAs will reflect a potential change in trend
quicker than Slower MAs
- Slow MAs are more likely to provide Support and/or
Resistance than Faster MAs
Try a combination of MAs, use the popular settings
for your timeframe as a base
- For trend observation try a Faster MA
- For potential Support & Resistance try a
Slower MA
Follow up infographics on Moving Averages will
discuss:
- The three most popular types of Moving
Average – Simple, Exponential and Weighted
- Moving Average (Crossover) Trading systems
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