Read price charts with moving averages like to cook a pie without butter or eggs. These simple lines above or below the current price may be much to tell, and their use in interpreting the market is truly unprecedented. Simply put, they are the most valuable indicators in technical analysis.
You can trade without moving averages, but in doing so, you are very much at risk. Eventually, these lines represent median levels, where market players are taking an important decision to buy or sell. Therefore, it is reasonable to predict that they are going to do before, not after.
The following is the 15 principles that you can use when trading in the moving averages:
1. 20-day Moving Average is usually short-term notes the trend, the 50-Day Moving Average - the medium-term trend, a 200-day Moving Average is an indicator of long-term market trend.
2. These three Moving averages are a natural boundary for the price correction. Two arguments speak in favor of these values: First, they determine the level, where the withdrawal of profits and losses must take weakened after a strong price movement. Second, their general recognition encourages market players to make self-realization of this strategy, whenever the price is close to those levels.
3. Moving averages submit false signals when the side of trade, because they are indicators, following the trend, which is measured upstream or downstream momentum. They are losing their effectiveness in the markets showing little or no movement in prices.
4. Characteristics of moving averages changes as soon as they are smoothed and turns. Turn of the rolling average of the horizontal position indicates a loss of momentum for this time format. This increases the chances that the price of crossing Moving Average is relatively easy. When Moving averages of different lengths arranged in a horizontal line close to each other, the price often fluctuates back and forth across these lines, creating a lot of "market noise".
5. Moving averages of permanent signs, because they are formed directly on top of the price. Their relative correlation with the development of the price varies with each bar. They also demonstrate a strong relationship in the form of convergence - divergence from all other types of support and resistance.
6. Use the Exponential Moving averages, or EMA, for longer temporary format, but go to a simple sliding average, or SMA, for shorter time formats. EMA attach more weight to recent changes in price, while the SMA considers each quotation to the same.
7. Short-term SMA allow a trader to understand how to operate the other players. The market audience using simple Moving averages, because they do not understand the Exponential Moving averages. Good intra-day signals are more reliant on what they think other market participants rather than on the technical side of the situation.
8. Place five to eight - and 13-SMA periodnye on intra-day charts to measure the strength of short-term trend. With the strong movements Moving averages build the line and point in the same direction. But they are separated by one at the maximum and minimum, while the price, finally, do not go in another direction.
9. Location of the price on 200-day moving average defines the long-term investor psychology. Bulls live above the 200-day moving average, while the bears live below it. Dealers absorb regenerative rally below the "line in the sand, while buyers come to the rescue above it.
10. When the 50-Day Moving Average crosses the 200-day Moving Average in any direction, it predicts a significant change in the behavior of buyers and sellers. When the 50-Day Moving Average rises above 200-day moving average - this is called a "golden cross", while Medvezhye intersection is called the "death cross."
11. For the price more difficult to break above declining moving average, the higher the rising moving average. Conversely, the more difficult for prices to fall after rising Moving averages than declining moving average cost.
12. Moving averages set in different time periods show the speed of the trend through their relationships with each other. Measure it using the classic indicator MACD, or using multiple Moving averages to your schedule and see how they diverge or converge over time.
13. Place a 60-day Moving Average volume for the green and red bar graph below the level of the price schedule to determine when a session showed an unexpected interest. Tilt the rolling average also identifies the hidden pressure of buyers or sellers.
14. Do not use long-term sliding average, to make short-term forecasts, because they will be abreast of current events. The trend may already be mature and closer to its end to tomuvremeni when the Moving Average submit buy or sell signal.
15.Urovni support and resistance determined Moving averages, where they diverge and converge together. See, when a rolling average bounce off of another moving average, rather than immediately break through it, confirming in this way, support or resistance. After the crossing, finally took place, this level becomes a support or resistance for future price movements.
Forex Magazine
based on www.hardrightedge.com
based on www.hardrightedge.com
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