Moving Average is a trend indicator that adds up to a chart for the forex strategy. It’s where the trading action is taking place. Like the name suggest, moving average are averages of the previous prices. The move is faster if they consider a short period. Traders like the forex moving average because they have a practical impact on the status of the market. Trading platforms place oscillators on the bottom of the chart to separate the window.
What is Forex Moving Average?
It is a strategy that signals future support and resistance of trends in trading. There are always at any moment; two values plotted on the chart.
• The actual price
• The moving average
The actual price is different than the moving average, that considers the volume traded are the Exponential moving average and simple moving average.
The simple Moving average calculates by dividing the average closing level to the considered period. Exponential Moving Average puts more impact on the current price than on the average closing price. It puts more weight on the current prices, reducing the lag. Forex traders use short-term Moving average cover Long-term Moving average to determine the trading strategy.
Moving Average Envelope strategy
MA Envelopes can use either the lower or upper setups to determine the moving average. It doesn’t matter the type of basis set for the envelope strategy when the forex trade causes simple, exponential or weighted MA. Forex traders should test different current pairs, percentages and time intervals to know to understand how to apply the best envelope strategy. Consider trading when there is directional bias to the price. Exit when the prices reach the upper band on a long trade or a lower group on the small business.
Moving Average Ribbon Strategy
This strategy can be effective when there is trend-change in either I of the directions. The ribbon strategy is used to identify the trend direction and strength of the trend. Buying and selling signals in the traditional are the same used in other moving average procedure. Traders should wisely choose how to constitute the crossovers trading signals. Below are some of the steps to follow when using the MA ribbon strategy;
• Observe for some time when most of the moving averages converge together, and the prices flatten out sideways. This converging shows little separation between moving average lines.
• Buy the order above the high range and sell the hierarchy below the lower range. When the buy order is triggered, place a stop-loss order below the lower range. Imperatively, when the sell order is triggered, put a stop above the high range.
Divergence Convergence Trading strategy
The convergence-divergence strategy shows the difference between the 26-period and 12-period Exponential Moving Average. The histogram plots a nine-period EMA as an overlay. The Converting diverging approach can also be used to know the direction and trend of the forex trade.
Various strategies can be created using this strategy;
When the trending prices are trending high buy, the MACD is crossing above the signal line and short sell when the MACD is crossing the lower signal.
• When the MACD falls below the weaker signal, opt to exit if long.
• When the MACD is above the higher signal, consider exiting if short.
Guppy Multiple Moving Average
It is composed of two sets of moving Exponential moving average. The first has three, five, eight, 10, 12, 15 trading days. It is believed to highlight the sentiments of short-term traders. The second set is made up of 30, 35, 40, 45, 50 and 60 days of trading. It is supposed to show the long-term trends. Where there is any need to adjust to compensate the nature of currency pairs, the second set of Exponential is the one to change.
The long-term strategy might be tiring if it appears not to give any support from the short-term trend. When the shorter direction starts going under the cross or above the long-term moving averages, know the trend could be turning.
As we have seen, there are multiple ways to use the moving average as part of forex trading. Moving average could be one way on its own. Before using the above-discussed strategies, always adjust the plan to show that it provides reliable results. These strategies only show the price in the market according to where the price has been. Consider using these strategies in the most trending market, and you will never go wrong.