Moving Average Forex Trading Signals
Moving averages can be used in various ways. Let the most popular methods in forex discuss.
The Detection and confirmation of the Trend
A rising trend is detected and confirmed when the exchange is located above the moving average and moving average is rising. A downward trend is detected and confirmed when the exchange rate lies below the moving average and moving average is falling. The trend can also determine by several moving averages on the forex graph.
In the above figure, the trend and determine confirms by means of two moving averages with a longer and shorter time period. The exchange rate is falling because the price is well below the 15-day and 50 day moving average. Also note that both lines are what the downside downward trend again confirms.
Moving Average Crossover Trading Signals
This is a popular system in forex which consists of a longer and shorter-moving average. The basic idea was that if the shorter the longer Massachusetts Massachusetts crosses of down, this gives signals. Conversely, when the shorter MA crosses the long MA from above, this indicates a sell signal.
The figure above shows a cross-system of a 15-day EMA (short) with a 50-day EMA (long). This is a great system as long as there is a trend in the market but will (many) false signals when the market is a sideways movement.
In order to improve this system, one adds very often, a third long-MA to the system in which one only is acting in the direction of the longest MA (eg, the 200-day SMA). His two shorter MAs above the longest, then one can only take buy signals and crossover sales ignore signals (see figure below). The reverse is true for sell signals on this system.
Support And Resistance
The moving average is also often regarded as a line of support or resistance. In a rising market, forex traders try to buy a currency pair when the price touches the moving average support line (buy on dips). Conversely, in a declining market forex traders try to sell the currency pair when the price touches the moving average resistance line (sell on rallies)
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