Trading in foreign exchange market – a risky undertaking. To reduce the likelihood of losing trades traders use technical analysis tools. One of the tools is the indicator "moving Average".
Opinions of experienced players about the need to use any additional constructions on the chart are inconsistent. Some believe that the numerous lines, the lines and histogram on the chart prices are creating confusion in the minds of players. Such gurus suggest you put aside all the "turkeys" and work only with the price chart.
Other guru reminded of the fable about the monkey and glasses and suggest to thoroughly understand at least one simple technical tool to understand its positive aspects and to test the theory practical application.
One such simple and useful suppliers of signals to the transaction is the indicator "moving Average".
Moving average – the average price of a stock asset for a fixed period of time.
The Parameter is used as the base in the formation of other indicators based on moving averages.
The time is counted in the figures plotting: candles or bars. The phrase “a moving average with a period of 15” means that the graph line will be plotted from the average values for each successive 15 bars or candlesticks.
Suppose, for example, formed the first 15 elements. On the basis of their calculated average price. In the formation of sixteenth candle first figure is dropped, the calculation of the candles from 2 to 16.
In the formation of seventeenth candle pattern is repeated. And so the calculations are produced for the entire array of the graph.
When trading in the terminal manually build the index lines do not. Drawing lines in automated trading programs, MT4 and MT5. Therefore, this article will not mathematical calculations. Stakeholders have the opportunity to read help information in the help section until you have spare time between transactions.
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You can choose any interval for calculating the average price of a currency pair. Periods of from 5 to 50 are referred to as short-term. For making investment decisions when buying or selling currency, you should analyze the periods from 120 and above as the most significant.
For example candlestick chart of the asset by the blue line moving average with a short period 20.
The Candle reflects the four option prices:
Accordingly, it is possible to specify the construction of medium-price opening or closing, minimum or maximum values. It is even possible to calculate the moving average values in each candle.
Options trading program take into account the aesthetic preferences of clients and offer a choice of thickness and color of lines and shapes – solid, dotted or dashed.
According to the mathematical method of constructing klassificeret four types of technical indicator moving average. We will for brevity denote the line by the acronym MA – from conventional technical analysis term Moving Average.
Classification occurs by assigning a rank to candles to perform calculations: the most significant and least significant candle.
Let us Consider four types of indicator. Two moving averages are applied permanently and effectively. The other two are used in rare cases.
Simple MA assigns the first and last candle in the period of equal importance. That is, in the interval 15 first candle is equal to the fifteenth largest. For this reason, the reaction of simple slow MA, and at short ranges the indicator moving average triggered with the big delay. Good simple MA for long periods.
Exponential MA gently confers the significance of the candles in reverse order: the last – the most significant of the first – outsider calculations. So the line reduces its sensitivity to fluctuations in prices in the beginning of the period and enhances the end. Therefore, the line responds to an array of graphics faster than a simple MA.
The figure shows the graph of the stock of the asset. The chart is built on exponential moving averages: blue for a short period, the red for long periods. At the point of their intersection generated sell signals a Sell Crossover and to purchase Crossover Buy.
Linear weighted MA on the principle of selection similar to exponential, but there are nuances.
The significance of the candles exponent decreases smoothly: n, n-1, n-2 ... n-14, is 0, for example, for period 15.
Linear weighted MA each candle adds weight, too, in reverse order, but more dramatically: 8n, 4n, 2n, n, n/2, …, and so on until the end candlestick pattern. This line is very dependent on changes in the exchange rates of the asset.
Smoothed MA is interesting generates an interval for calculations. Taken not only candles in the current designated periodfor example 15 candles. Taken into account and previous intervals. But for them the significance decreases as one moves away from the current time interval. This smoothed signal is appropriate only to determine long-term trends. But due to large amounts of computing line fixed, and it is used rarely, mostly to study the techniques of technical analysis.
All four of the indicator "moving Average" represented. In practice, the players use exponential MA to identify short-term trends; simple MA suitable to predict for a long period.
Among the 15 chosen for the example a short period. In practice other intervals, shorter or longer, for example, 8 or 21 candles candle.
At long intervals to build MA choose the year – 365 days, or six months – 180.
The aim of the analytical constructs additional lines on the chart – determining the point of scrapping trends. On the market Forex indicator "moving Average" – the simple instrument.
We Introduce the concept of "fast" lines on the short periods and "slow" - for lines for long periods.
The Scrapping trends happening at the intersection of fast and slow MA. The figure shows a graph of an asset with the crossing of two medium-sized linny, fast with a period of 50 days and slow with a period of 20 days.
In a trending market there are rules:
In markets with high volatility creates a lot of noise of movement, so the rule might stall.
Remember that line give lagging signal. Therefore, to enter into the purchase transaction indicator crossing moving averages to use is not worth it. Due to the late receipt of a signal the trend may be losing strength. The player will buy and price will increase slightly and will go down, so that the market participant will not have time to react and time to take the burden. To save losses, the intersection should only be used for sale.
For decision making about the power of trends you can use the slope of the line. Corner used on large periods above 21. The longer the period, the steeper the angle, the more pronounced the tendency.
The Price of currency pairs on Forex is not the only rising or falling, but to be sideways. Evaluation of indicator of the slope of the moving average helps to determine the tendency to lateral movement.
When trading strategies intersection of moving averages set up the indicator MA Angle. As a source of signal not used, but the image improves the perception of the situation on the monitor screen.
The Indicator has the form of a color histogram with the center line located under the graph. The color scheme of the standard histogram:
For example, consider the graph of the Euro - dollar. Moving average is painted with Golden color. The moving in addition to histogramme drawn and signed arrows angle:
The more intense the growth rates of the exchange of an asset, the higher the column chart, and Vice versa, with a decrease in the rate of growth reduced the height of the column.
The higher the growth rate of prices, the steeper the slope of the line MA, the stronger the trend – the player can hold the position or take a position.
The lower the rate of change of prices, the smaller the angle of the MA, the weaker the trend.
At an angle, tending to zero, you can only sell "over the rustle of nuts".
Trading system for estimating signal-to transactions are configured at the angle in the range from 15° to 35°. The setting of the indicator angle of the moving average can be done on every exchange traded asset separately.
Let us Consider the daily price chart of the currency pair pound - dollar, hung with three moving averages: short 10 and 20, 200. It is seen that during a strong trend the price can not break through the line, repelled by them, and the trend is likely to move is stored. That is, moving averages act as support and resistance. And lines dynamic, as they are moving with the price of the asset.
Moving averages can be used as the levels for placing stop losses. To put foot outside the lines. When approaching the current price of the foot moving.
Once again: do not use the intersection of the fast and slow lines for purchases no market activity or on long-term deals. Seen crossing to the exit, as evidenced by the indicator. Two moving averages crossed – the trend changes.
If the fast and slow crossed, the player has closed the deal, and at this time the price has crossed the average, have to see how long the price will be above resistance or below support.
A False breakout is formed of a single candle. If the price draws three or four candles above or below the average, so there is a high probability of a trend change. Why not a hundred percent confidence in the change? Because it is necessarylook at the period average. More than the period, the more likely a change of trend in the breakdown. On small periods of the moving average value is too small.
World stock exchanges open at different times. There are periods of overlap hours when you can pinch off a piece of the profit from the foreign exchange pie.
The News watch is also different. Flow of important events in each region is issued on the air at a certain time.
The Price can move in the right direction for the trader several hours during the trading session.
These three reasons make the player stick to the monitor and lose time waiting for.
To Correct the situation will help alert – sound notification function trading terminal.
To Install the notifier in the terminal in two ways:
1. On the screen-traded currency pair to select the menu "Trade", and in it the option "Alert" and summing the cursor to the line prices. The notifier is established immediately.
2. At the bottom of the screen select the tab "Alerts", choose "Settings" and fill in the dialog box. The program offers a choice of 3 conditions of operation of the notifier:
When an alarm is triggered it is possible to configure the following:
Comfortable to use alerts when you plan a point of entry or exit. Developed many programs for the indicator moving average with alert. In addition to the graphical display in the form of arrows above or below the intersection of the middle lines, the user receives a beep.
When trading in the Forex indicator with alert is used for short periods and with distinct trend, because of the sideways range it turns out a lot of false positives, and for long periods from an hour signal comes with a delay.
In conclusion: before you start working on a real account any theory of technical analysis, even with the most positive reviews, check on demo accounts. Having learned the lesson and completing the quiz, the user can start enrichment on the Forex market using simple and useful moving averages.
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BE: https://tostpost.com/be/f-nansy/4705-ndykatar-sl-zgal-naya-syarednyaya-u-forekse.html
DE: https://tostpost.com/de/finanzen/4704-der-indikator-durchschnittliche-rollierende-in-forex.html
ES: https://tostpost.com/es/finanzas/4708-el-indicador-promedio-m-vil-en-el-mercado-de-divisas.html
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UK: https://tostpost.com/uk/f-nansi/4708-ndikator-serednya-kovzna-v-foreks.html
ZH: https://tostpost.com/zh/finance/2854-the-indicator-moving-average-in-forex.html
Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."
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