Forex Indicators_4. Learn Forex Moving Average

Lesson 4: Learn Forex Moving Average

If you wish to smooth out the price action, moving average is a great technical
indicator. It shows the average price of a few periods of the stock.
There are two types of moving average. The simple moving average, as the title
implies, takes the closing price of the certain period of days and averages it out.
Exponential moving average gives greater weight to the more recent prices,
therefore it is more sensitive to any price changes.
There are several ways to use moving average in your trading. Here are some of
them: First up…moving average can be used to determine the direction of the trend.

Typical moving averages used by traders are 50, 100 and 200 periods. So for
example, if the price is above all three values, it’s in an up-trend; if the price is below
all three, it is considered in a down-trend.

Next up...moving average can be used as support or resistance. Often, the price
finds support or resistance at a specific moving average.
For example, here you see that the price repeatedly bounces off the 10 day moving
average, so you can enter the market by buying every time it happens until the price
breaks through and you close your positions.

A third way to use moving average, is to stop your trail. Once you have found
trending market, you want to stay in it as long as possible.
For example, if you have entered here, you can just keep trailing your stop by
keeping it under the moving average by a certain number of pips and adjusting it
everyday as the moving average flux shades.