The main idea of the indicator is to smooth out the price noise — the price fluctuations that do not matter — and reflect the price movement ignoring the unimportant price changes. This way a trader can make a prediction about the future price changes. There are 4 types of the Moving Average, which we will review briefly. In order to use the Moving Average in a trading strategy, first, it is necessary to understand what this indicator can show.

MA reflects the direction of the trend by following the candlestick chart and smoothing the price fluctuations for a more accurate prediction. Using the MA indicator, traders can determine the direction of the trend and possible entry points for a deal. In order to determine the direction of the trend, a trader may, for example, do the following:.

Apply a Moving Average to the chart. When the trend is upwards, the Moving Average will be under the candlestick chart.

The steeper the line, the stronger the trend is. How to use this information to open a deal? What a trader needs to be looking for is the crossover — where the indicator meets the chart. Why is that? Because when the chart crosses the indicator upwards or downwards, there is a high probability of trend reversal. An EMA indicator with the standard settings is used. In order to find potential entry points for deals, a trader may, for instance, do the following:. Apply an MA indicator to the chart and watch for indicator and chart crossovers.

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When the indicator is crossing the chart from below upwards, the indicator is considered to give out a Buying signal. In case the indicator is crossing the chart from above downwards, it may be a Selling signal.

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There are ways to tailor this indicator to your particular needs. The Moving Average is a great indicator as it is uncomplicated in usage and it can be combined with many other indicators for better performance. As it is a trend indicator, it tends to fall a little bit behind the trend.

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Therefore, in order to increase accuracy, traders may use oscillating indicators, such as the Stochastic Oscillator or CCI. Combining several indicators is always a better practice as it helps to confirm the received signals of each indicator and base the decision on more data. NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.

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How to trade with the Moving Average?

Salam Zeeshan, We can not tag any strategy as the best ones or define some shortcut as it all depends on how you trade and your trading patterns. For each trader it is different, some strategy can be good for one trader while it may not suit another trader.

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Unemployment Rate. Non-Farm Employment Change. I then wait for the 5 3 ema 8 ema crossover binary options EMA to cross the 20 EMA then I wait for price to pull back and touch the 20 ema for my entry This trade has yielded me very good results. This is ideal for 5 minute charts. Overlays are based on EMA crossovers. I may be on to something.

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