Moving Average (MA)
MOVING AVERAGE (MA) are the most basic trending indicator. They show you what direction a currency pair is going and where potential levels of support and resistance may be — moving averages themselves can serve as both support and resistance.
Moving averages are constructed by finding the average closing price of a currency pair at any given time and then plotting these points on a price chart. The result gives you a smooth line that follows the price movement of the currency pair.
You can adjust the volatility of a moving average by adjusting the time frame the indicator looks at to obtain the average price. Moving averages that look at fewer time periods to determine an average are more volatile. Moving averages that look at more time periods to determine an average are less volatile.
- Bullish signal: The shorter MA cross above the longer MA
- Bearish signal: The shorter MA cross below the longer MA
If the moving averages cross over one another, it could signal that the trend is about to change soon
- MA1 length: 25
- MA2 length: 89
Moving average crossovers are helpful in identifying when a trend might be emerging or when a trend might be ending. The crossover system offers specific triggers for potential entry and exit points.
- Bullish signal: The MA cross above the price
- Bearish signal: The MA cross below the price
- MA length: 89
Moving averages provide useful trading signals for currency pairs that are trending.
Entry signal — when an up-trending currency pair bounces back up after hitting an up-trending moving average, or when a down-trending currency pair bounces back down after hitting a down-trending moving average.
Exit signal — when you enter a trade on an up-trending currency pair, set a stop loss below the moving average. As the moving average rises, move your stop loss up along with the moving average. If the currency pair ever breaks far enough below the moving average, your stop loss will take you out of your trade.
When you enter a trade on a down-trending currency pair, set a stop loss above the moving average. As the moving average falls, move your stop loss down along with the moving average. If the currency pair ever breaks far enough above the moving average, your stop loss will take you out of your trade.