Hello all! i’m Anthony from orlando, Im a bit new to trading and have understood a lot and learned a lot on my own, however it is now time for me to reach out and ask a quick question. Moving averages…lots of information on them via youtube and other informational sources. Anywho i have some understanding but am still a bit lost, i use two moving averages the ema and the ma. i just dont exactly know how to set them up, oanda sets them up with a 9, however i cant find any information if thats actully a good number. if anyone could share some information on that, that would be great!
There’s no agreement on what’s a good number because the number to use is the one that suits your style and strategy. Firstly time-frame - a 9-minute MA will tell you whether the trend over the last 9 minutes has been up or down or flat. But if you want to hold a position over 1-4 weeks, it would be better to use a daily time-frame to gauge trend.
Secondly, a 9EMA will be more responsive to price and will turn up and down and be crossed more often by price than would a 50EMA. But there is no evidence that a faster MA is more reliable in trading, they just give more frequent opportunities with a more limited time horizon.
EMA always means Exponential Moving Average. Just “MA” usually means Simple Moving Average (or SMA). There is no evidence that one is better than the other.
All MA’s are pretty rubbish at identifying price reversals because they lag price action. But they are helpful in identifying trend reversals, which is a different thing and which are a chart feature which very few traders take positions based on.
Hey A, welcome to the “Group”. MAs have various forms, obviously, and it is almost like soft drinks, some folks like Pepsi, others like Coke etc. Zaner Group likes triangular, Dan Gramza like straight MAs, Jea YU likes Exponential. But whichever you choose you need to realize a couple of things.
One. any MA is just a physical representation of past price action, it cannot “predict” future prices, or momentum.
For example, a numerically small period MA could follow the price action on the rise all the way to a price top, and if set at a low fractal, you might see a 30 pip move in 2 Mins, but because it is a small period sampling, it will follow this price move, but it has very little forward looking value. Why? because as fast as it went up, it could reverse back to where it started. Unless you are tick or sub second charts for entry, 2Min in general is not a trend, unless of course you are trading within this 2Min period.
The other issue is that MAs can be used as Dynamic price levels, and Dynamic trend lines. For example, you might have a 30 ppd Simple MA, and you see that in the past, price has moved up to this MA one time and has not broken it, in general, this would indicate a top, and you would be safe setting a short order, since may have observed that on a specific pair, it takes 4 or 5 hits to move above the 30 ppd.
Or, you are in an uptrend, and price stays above the 30 perhaps having a tail that breaks through but no closes below the 30. So you can wait to the next bar open and enter, this helps you to be able to have a higher directional probability.
Using MA crosses, can be a double edged sword. It can get you into or possible out of a trade but it can also expose you really bad whipsaws.
The Ever Educational VIPER
Mate, try with different parameters & find your best combination manually! By the way, in my trading I am comfortable with EMA20.
Check out the Ichimoku indicator. Read up on how the lines are constructed. It may help to give a more in depth understanding on Moving averages as well as how to use them. Ichimoku are an advance bunch of MA.
Thanks for the information you guys are awesome!