|
Moving Averages
Morning all. I hope you are well.
Thank you for your patience.
Here's the lesson about moving averages.
Moving averages are a very important part of my trading strategy.
In fact, they play a big part in most strategies and have done for many years.
Let's assume we are using a 20 moving average. The current plotted price of the 20 is the last 20 candles added up and divided by 20. SIMPLE ! hence the name, simple moving average.
We also use exponential which add more weight to the most recent candles and ignores - to a certain extent - the least recent of the period.
We use a 20 and 50 moving average and wait for crossovers and squeezes to guage the possible next direction of a move.
On a 60m chart we also use a 5ema which is our 15m 20ema and when all 3 are stacked in the correct way and in close proximity this indicates a good move could be round the corner.
Look at the two snapshots below.
The 1st is demonstrating the 5/20/50 stacked in correct order, one for long and one for short on a 60m chart. (please ignore trianglular chart patter)
The 2nd shows a crossover on a 5m chart, which usually indicates a reversal. Once again, we are looking for the correct order ma's stacked neatly, 4/20/60
Back test and look for these and you will become a better trader already if you didn't know about this before.
Always look for a minimum of 3 moving averages stacked neatly in correct order.
Whether this is 4/20/60 on 5m chart or 5/20/50 on the 60m chart. These will become your most reliable friends once you master how they work!
I will do some more work on this later but for now just try to identify these on your own charts so you get a deeper understanding.
Next I will introduce some more averages.
__________________
I'm now sending trading notes out twice a day with videos too. Have a look HERE.
There's one set at 6:30 UK time for London and one at 12:00 for U.S session, plus I will send a summary video after each session 
Last edited by FX Pimp; 03-27-2009 at 10:50 AM.
|