Monday, December 16, 2013

How to use Moving Averages

How to use Moving Averages in stock and forex trading
Moving Averages can be used as a trend indicator especially in the forex market. Some traders that know how to read charts will use the moving average to confirm support and resistance levels. This can include using moving average crosses for buy and sell points. To start out you can set your MA's at wma 5 and wma 20 on your charts.
  These are widely used moving averages on both the stock trading and forex charts. Traders who use a Moving Averages as a trend filter will buy when the trend is moving up or down. When watching this chart indicator you can look for the price action to consolidate at the top or bottom of the MA. You need to remember that the MA's are lagging on the chart. This means they don't move until the price does or when a candle closes. This also depends on what time frame your charts are set at.
Many forex traders will use the 200 day moving average as a support and resistance area. One thing to remember if the price is near the 200 MA you should wait for confirmation before you decide to hit the buy or sell button. Waiting for the trend direction off the 200 MA will increase your chances of making a profit on the trade.