Is intraday trading quite a tough nut to crack? Do you know the best moving average Crossover for intraday trading? Here’s the right place to learn about moving averages.
Many traders might not really call Moving Averages (MA) for an indicator as it is only an average of price. We do not really care whether it is an indicator or not. All we care about is that MAs are a great tool in Forex trading.
Using Moving Averages for Trading
It is simple to use but very powerful and helpful filtering out bad trades. Moving Averages has been part of technical analysis since the beginning as they are easily calculated (important before computers were invented). As mentioned earlier MAs are just an average but they help to smooth out the price making it easier to identify the trend.
Also a great tool for removing noise in volatile markets. But like any other indicator moving averages lags price. MAs are normally calculated by using the closing price of the price but opening price or high/low can be used as well. A 20 period MA is using the last 20 price bars to calculate the value of the MA. So if the 20 MA shows a value of 12.50 it simply tells the trader that the average price over the last 20 bars is 12.50.
Exponential Moving Averages
The most common Moving Averages are Simple Moving Average (SMA) SMA is calculated as mentioned above. It uses the price over the last X amount of bars and takes the average these prices. Exponential Moving Average (EMA) EMA was invented to address the problem with averages being slow to change to current price moves. EMA tries to fix this issue by putting more weight on current price bars. EMA adapts faster to current changes in price.
It is up to the trader to determine what length or which type of MA to use, SMA or EMA. This is done best by trial and error. A lot of screen time looking at your favorite timeframe and the market will help you decide. Moving Averages are a great tool in your trading arsenal and can be used for many things, such as trend determination, entry, and stop loss. Trend MAs are probably the most used tool when traders need to determine a trend, both short term, and long term. Traders though do not use them in the same way.
How to Trade Moving Averages Crossover?
Find Trend of a Currency Pair
A) By the slope of the MA. So if the slope is up, the trend is up.
B) Price below or above the MA. If price is above MA the trend is up.
C) (1) shorter MA above or below a longer MA. If the short term MA is above the long term MA then the trend is up. MA Trend Price Above Below MA Short Long Trend (2) Entry MAs are also often used for entry signals.
Entering a Trade in Forex
A) Price closes above or below MA. A close above would trigger long entry.
B) Enter on limit order placed at or around the MA.
C) Crossover of a shorter and intermediate-term MA. The shorter MA crosses up through the intermediate MA trigger a long signal. MA Entry Close Above/Below MA Entry Limit Order MA Entry MA Crossover3)
Stop Loss MAs are also a great tool for stop loss and trailing stop. A close above or below the MA will trigger the stop loss or trailing stop. When being long and the price closes below MA your stop is triggered.