Moving Average The Moving Average Technical Indicator shows the mean instrument price value for a certain period of time. When one calculates the moving average, one averages out the instrument price for this time period. As the price changes, its moving average either increases, or decreases. The only thing where moving averages of different types diverge considerably from each other, is when weight coefficients, which are assigned to the moving average indicator forex percuma data, are different.
In case we are talking of Simple Moving Average, all prices of the time period in question are equal in value. The most common way to interpreting the price moving average is to compare its dynamics to the price action. When the instrument price rises above its moving average, a buy signal appears, if the price falls below its moving average, what we have is a sell signal. This trading system, which is based on the moving average, is not designed to provide entrance into the market right in its lowest point, and its exit right on the peak. It allows to act according to the following trend: to buy soon after the prices reach the bottom, and to sell soon after the prices have reached their peak. Moving averages may also be applied to indicators. That is where the interpretation of indicator moving averages is similar to the interpretation of price moving averages: if the indicator rises above its moving average, that means that the ascending indicator movement is likely to continue: if the indicator falls below its moving average, this means that it is likely to continue going downward.
This value is then divided by the number of such periods. N — number of calculation periods. Exponentially smoothed moving average is calculated by adding of a certain share of the current closing price to the previous value of the moving average. With exponentially smoothed moving averages, the latest close prices are of more value.
P — the percentage of using the price value. In the case of weighted moving average, the latest data is of more value than more early data. Many trading platforms place an oscillator at the bottom of a chart, in a separate window. This is the visual difference between a trend indicator and an oscillator. Moving averages are, like the name suggests, an average of previous prices. Depending on the period considered, they move faster if they consider a shorter period, like ten or twenty candles. Or they move more slowly when one hundred or more candles define the average.
Traders love moving averages because they have a tremendous visual impact on the state of the market. They can buy or sell in bullish or bearish markets thanks to moving averages. What are Moving Averages in Forex? The value of moving averages is different than the actual price. In a bullish trend, the MA is below the current price, while in a bearish trend, it is above.
Traders can use many types of moving averages. For example, consider the daily time frame of any currency pair. Go onto the trading platform and look for the trend indicators and select any MA from that list. The image below shows the four options for moving averages, but that is not all. By selecting the SMA and using the settings from the previous example, we can plot the average on the chart. When the price is below the moving average, the market is bearish.
The same logic defines a bullish market when the price is above the moving average. While this sounds simple, keep in mind that in Forex trading simple things work best. Calculating Moving Average The formula to calculate a moving average is simplistic. However, this can differ, depending on the type of moving averages used.