SMA, Double bollinger bands strategy to trade forex, and WMA on One-Minute Chart. Moving averages are a technical indicator that show how the price has moved, on average, over a certain period of time. A four-period SMA with prices of 1.
2641 gives a moving average of 1. While knowing how to calculate a simple average is a good skill to have, trading and chart platforms calculate all this for us. Simply select the SMA indicator from the list of charting indicators, apply it to the chart, and adjusting the number of periods used. The advantage of an SMA is that you know exactly what you are getting. The SMA value is the average price for the number of periods in the SMA calculation. Common SMA values are 8, 20, 50, 100 and 200. Due to their different calculations, the indicators appear at different price levels on the chart.
These other types of averages are discussed next. In other words, recent prices are given more weight than past prices. A four-period EMA with prices of 1. 5560, with the last value being the most recent, gives a current EMA value of 1. As with the SMA, charting platforms do all the EMA calculations for us.
Select the EMA from the indicator list on a charting platform and apply it to the chart. Go into the settings and adjust how many periods the indicator should calculate, for example, 15, 50 or 100-periods. The EMA adapts quicker to price changes than the SMA. For example, when price reverses direction, the EMA will reverse direction quicker than the SMA. This is because the EMA applies more weight to recent prices, and less weight to prices that occurred in the past. This is a similar concept to the EMA, but the calculation for the WMA is different.
WMAs can have different weights assigned based on number periods used in the calculation. The weighted moving average is more customizable than the SMA and EMA. The most recent price points are usually given more weight, but it could also work the other way, where historical prices are given more weight. For analysis, all the moving averages help highlight the trend.
When the price is above its MA it shows that the price is trading higher than it has, on average, over the period being analyzed. When the price crosses above its MA it shows the price is getting stronger relative to where it was in the past, because the most recent price is now higher than the average. If the price crosses below its MA it shows the price is getting weaker relative to where it was in the past. One longer and one shorter-term MA—for example, 20 and 50-periods— can be added to a chart simultaneously. When the 20 crosses above the 50 it indicates that short-term price momentum is moving to the upside. When the 20 period MA crosses below the 50 it indicates that the short-term price momentum is moving to the downside.
MAs can also be incorporated with other indicators to provide trade signals. An EMA can provide buy signals when combined with Keltner Channels. A strategy may include buying near the EMA when the trend is up and the price is pulling back from the top of the Keltner Channel. Depending on the strategy being used, one type of MA may work better than another. Try out different MA combinations and see which provides you with the best results.
You may find that for each market you need to adjust your settings slightly. I am so happy I found your course. I’ve been trading forex for many years but haven’t done anything to improve my profits. Since taking some of your more advanced courses, I have a better understanding of what I should be doing and I’m looking forward to being able to apply some of what I’ve learned to a real account. Kenneth Martin FX Academy is great. I’ve learned more in a few weeks than I learned in all the years I have been trading.
I really like the cute videos and even the quizzes are cool. Good introduction to the benefits of forex trading. Rajanish Reda Learning how to trade the forex market from FX Academy has been very helpful so far and has given me a powerful knowledge base. It has really helped me to understand the currency market and also money management. Anita L FX Academy is a great educational tool.