Moving Average (Moving Average) In Forex
This indicator is undoubtedly the most frequently used in forex trading to analyze the trend of currency pairs. The moving average (MA) is suitable to see if the exchange rate in a rising, falling or moving sideways trend.
The moving average is defined as the arithmetic average of the closing prices of the last n time periods. A period of one minute, but also may be one days, or even 1 month. The moving average filters sharp price movements and exchange rate movements shows the trend price trend again. This indicator is represented by a smooth line.
Most Popular Types of Moving Averages In Forex
1. Just moving average (Simple Moving Average - SMA)
Every closing will equal weight of n time periods. For example, if the 3-day SMA would like to calculate the following EUR / USD exchange rate values: 1.5000, 1.5050 and 1.5100, then take the sum and divide the result by 3. It just voorschrijdende average amounted to 1.5050. You do not have to calculate course, this is automatically done for you by the trading platform.
The above shows the 9 day, 18 day and 36 day moving average just are plotted. The less n time periods (9 daily) are being taken, the faster the SMA responds to current fluctuations courtyard. The reverse for more money n time periods (36 day), the SMA will now be slower to respond to current fluctuations courtyard.
Most popular SMA time periods used in forex trading:
Long term: 200 SMA and 100 SMA
Medium term: 50 SMA
Short term: 21 SMA and 13 SMA
2. Exponential moving average (Exponential Moving Average - EMA)
A type of SMA weighted with equal weights, there is more current account exchange rate fluctuations. Even though there is less importance given to exchange rate movements in the past, it takes into account all past price movements for which the EMA is calculated.
On the figure above one sees that the EMA is closer to the current price than the SMA. This is because the EMA gives more weight to current exchange rates.
EMA most popular time periods used in forex trading:
Long term: 200 EMA and 100 EMA
Medium term: 50 EMA
Short term: 21 EMA and 13 EMA
Moving Average (Moving Average) Basic Interpretation
The exchange rate is regarded as rising when above the moving average.
The exchange rate is regarded as falling under when the moving average.
The exchange rate is regarded as sideways when each above and below the moving average balances.
What Type Of Voorschrijdende Average Should I Use In Currency Trading?
Both! Many trading strategies and systems are based on a combination of SMAs and EMAs. More on this in the next lesson.
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Forex is simple follow the trend and you will rich.
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