Forex Trading

MOVING AVERAGE – INDICATOR

This indicator is considered as the most fundamental of the  trend indicators, especially because it shows  on the one hand the direction of movement of the tool and  on the other the potential levels of support or resistance. Moving average uses  the average price of the currency pair at closing (but can also use the price at opening or closing) and books it down on the graph.

The result is a fairly tight line. You can influence on the  values of the  indicator  as you reset the  frame time which is  used for average price at closing. In short periods moving average is sharper , while longer periods make it smooth.

Moving average signals 

Moving average trading signals indicate the given currency pair that follows the trend. Alerts for opening a position – when  the currency pair is in ascending or descending trend and the price starts from the next trend  moving average.

Signals for closing  a position – when  the investment is in ascending or descending trend. Here traders usually put 'stop loss' order above or below the moving average. When the indicator  monitors the trend the stop order is moved so that to monitor the indicator. If the price pierced moving average, the contract will be executed and the position will close.

Advantages of the moving average:

- Identify simple trends

- Flexible and  can be set so that it reflects both short and long periods.

Disadvantages of the moving average: 

- Follow  the price on  the market with some delay. Calculated data are historic, which is not always an indicator of what that can be expected in the future and this to be repeated.

What is more in consolidating markets and markets „in the channel” it can not provide clear levels of support and resistance.