How to trade forex using the Moving Average (MA)

In this article we would be discussing on how to make use of the moving average as a trading strategy for forex.

What is a moving Average:

A moving average is a calculation to analyze data points by creating a series of averages of different selections of the full data set.

Moving average is one of most used technical indicators used by forex traders.

A moving average tells the future move of a price. They are different ways traders make use of the moving average.

A trader can make use of just one moving average and some can make use of more. No matter what, moving average strategy is a very good strategy you can use in trading the financial market.

Moving averages are calculated to identify the trend direction of a stock or determine it's support and resistance levels. MA moves based on past prices, so it follows trends.

The MA is a really good strategy for scalpers. If you are a scalper looking to scalp few profits from the market then the MA is for you.

Now, before i go straight into using the MA indicator for trading, you would need to know the major type of Moving average we have:

Type of MA:

• Simple moving Average:

This is calculated by taking the arithmetic mean of a given set of values over a specified period.

• Exponential Moving Average (EMA):

The EMA gives more weight to recent prices in an attempt to make them more responsive to new information.

Now let's go into how to apply the moving average on your chart and how to use it for forex trading.

You have to insert the MA into the chart

(1) Moving average

period:50

shift:0

Method: Smoothed

Apply to: Close

Style:4pixel (RED)

(2) Moving average

Period:10

shift:0

method:Exponential

Apply to: Close

Style:4pixel(Black)

(3) Moving average

Period:25

Shift:0

Method:Exponential

Apply to: Close

Style:4pixel(Green)

Now this is how it should show on your chat

Now how to use:

To Buy: When the black is above the green and both should meet together in an uptrend, that is a buy. You get a confirmation that it is truly a buy when the Red crosses both the green and black together. You place your stop loss 10pips from your entry and take you profits at the next meet of the three moving average.

Picture for Illustration

When the black is above the green and the red moving average gives a buy confirmation.

You go long/Buy after the confirmation

Now you take your profits when the three moving average meets again

The vice versa is applicable for a sell. Once the black candle is below the green candle in a down trend and both should meet together that is a sell. You get a confirmation when the red crosses both the green and black candle together. You place your stop loss 10pips from your entry and take you profits at the next meet of the three moving average.

Pictures for illustration

When black crosses below the green and the red meets for confirmation that is a sell

You go short/ Sell after the confirmation

This strategy works on all time frame for trading

Komolafe Peter Adedayo

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