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Basic Moving Average Learning
Moving average (MA) is a trend following indicator. Moving average is
widely used by traders in the world because it is versatile and easily
constructed. It indicator for follow trends in the movement of a
currency. Moviing average identify and signal to a technical trader that
a new trend, a sustained movement either up or down in the currency,
has begun or that an old trend has ended or reversed. It is easier to
see using a moving average is that it acts to smooth the volatility
inherent in looking at the price action alone to recognize trends.
Moving Average could shows you the average price in the period of time.
Moving Average of different types (Weighted Moving Average (WMA),
Exponential Moving Average ( EMA) and Simple Moving Average (SMA) )
differ from each other only in terms of weight coefficients, which are
assigned to the last data.
The basic to use moving average is to just plot a single moving average
on the chart. When price action tends to stay above the moving average,
it would signal that price is in a general uptrend and if price action
tends to stay below the moving average, that indicated downtrend.
Here is the illustration:
The red line is Moving Average. Price action represented by
candlestick chart, tends to stay above the red line (Moving Average). In
this case, we can say that current trend is uptrend ( bullish).
Some trend followers use this indicator to make forex forecasting and made decision. Is it that simple? The answer is NO.
This only basic used of moving average. The fact is, you need to
practice use this indicator in different terms and sometimes you need to
set up more than one moving average on your chart in order to provide
more qualify signals.
