Forex Indicator – How To Use Moving Averages To Your Advantage

Moving average is a lagging forex indicator which means that it is slow and it can only tell you what had just happened instead of telling you where the price is likely to move. However, by utilizing this lagging forex indicator together with repetitive price patterns, you can then form a reliable forex trading system to use.

First of all, let me explained what is moving average. It is a forex indicator that gives you the average price for a number of time depending on your settings. There are 2 types of moving averages that your forex platform will provide.

1. Simple Moving Average (SMA)
2. Exponential Moving Average (EMA)

If you have been seen a forex chart, you will notice that the price is constantly fluctuating up and down making it tough for you to visualize price action. What moving average does for you is to give you a visualizing line that can allow you to see the price movement.

Other than using the gradient of the moving average as a trend indicating tool, you can also make use of this forex indicator to place your trade. One of my favourite method of using moving average is the crossover.

This is what you need to do with this forex indicator:

Step 1: Set up a long term EMA (50 EMA)

Step 2: Set up a short term EMA (20 EMA)

Step 3: Observe the crossover of these two lines

If the short term moving average is above the long term moving average, this is known as the golden cross and it usually indicates that the trend is moving up. If the short term moving average is below the long term moving average, this is know as the death cross and it usually indicates that the trend is moving down.

This does not means that you should trade every crossover as it can be very devastating to your account. What you need to do is to make use of trend line or trend wall to help you place your trade. Remember this, you should only trade when there is a trend line break. If you do not know how to draw proper trend line, you can take a look at Tom Demark book on “The New Science Of Technical Analysis“. This is the best forex book that I have found regarding drawing trend line. Very accurate and dynamic.

If you are looking for forex indicator to use for your trading, you must add moving average to your toolbox.

Here is where you can learn good forex strategies

I have written weekly forex trading signals to share my forex analysis for the week and hope that you can profit from it.

Be Sociable, Share!

• 

1. Forex Indicator – How To Trade Using Moving Averages
2. Forex Indicator Top Pick – The Best Forex Indicator To Use
3. Macd Technical Indicator Explained
4. Forex Indicator – Important Reversal Candlestick Patterns You Must Not Miss
5. Useful Forex Candlestick Indicator I am Using