Do you use it in your strategy? Why do you think they’re important? Which ones do you use? Sorry for so many questions.
I only use moving averages and daily pivots on 5mins and 1min time frames.
They act as dynamic support and resistance especially 8EMA, I also have 20,50 and 200SMAs
of course to me is one of my favorite indicators.
I’ve been trading @americantrader’s EMA channel scalping strategy. It’s uses the 6, 14 and 32 EMAs.
Personally, I prefer using moving average much because it gives traders trend-specific ideas by utilizing which we can make better profit.
I do use it because this shows you the true movement of the market and can reduce the mislead by stop hunters or spikes, yet I dont count on it too much because it is lagging, it shows thins a little too late.
I use MA’s as my main yardstick to tell me which pairs are moving most and fastest and which currencies are strongest and weakest. I hate buying the one JPY pair that is going down when the other 6 are going up.
I also use it to define entry signals. Yes a tall candle with a close way above the low can signify something, but an MA or two can help to rank those opportunities so you don’t miss the best and don’t take the weakest.
It really depends on the trading or investment approach you go for, but moving averages can play a pretty important role. Some traders are big fans and swear by them when it comes to deciding whether to buy or sell.
I don’t use any other indicator than MA’s and never have done. I keep my charts as clean as possible.
I use MA¨s to tell me in which direction price is currently heading and then mark what I think are relevant S/R levels as targets that price might reach. If the MA’s subsequently tell me that the target might not be reached then I am out of the trade.
I don’t, however, recommend relying on MA crossovers as a trading method because of the lag nature. MA trading raises a lot of questions with respect to automated v. discretionary trading. (I only feel comfortable with discretionary trading).
i sometimes look at the ATR as well, as a fast/lazy volatility-guide, but apart from that most of your post applies to me also (as they so often do)
i find a moving average (sometimes two) useful, but would never dream of using their crossovers as trade entries
i use SMA’s, not EMA’s, as i want them to lag; EMA’s are a bit too fast-responding for me
My MA’s are based on the weekly chart because I tend to trade in the direction of the weekly trend, but my entries are done on the 4H chart. So, the MA’s will tell me at a glance which is the best direction to trade each pair without having to flip back and forth.
Ditto. Great minds…
Their simplicity makes them very popular way of giving an overall sense of market direction. Doing a quick web search will show you the high variety of popular combinations for different situations. Many traders also treat them as a source of signals - crossovers of different MAs and price breakthroughs. You could consider thinking in terms of MA channels as well (a bit like Keltner or Bollinger bands).
Yeah, I do think MAs are important as they help identify trends in forex market data. I personally use the 50-day and 200-day simple moving averages (SMAs) to get a sense of medium and long-term trends. But remember, they’re just one tool. Always complement them with other indicators and strategies
i don’t, actually
i think the idea that the entry will somehow be “better” if it’s “confirmed” by other indicators is a big fallacy, and that the reality is that if the subsequent price-movements aren’t in accordance with what a MA or two suggested as the probable direction, it won’t be in accordance with the other indicators, either
agreement with trend-direction observed on charts of different time-frames, now, that’s a whole other subject …
i don’t use moving averages since they lag and only work in trendy markets but I’m trading mostly ranging markets.
use an ADX indicator and if the adx shows a value 25+ then you can use a MA, it definitely would work, especially on higher timeframes.
if adx is below 25 then MA probaly won’t work but could be used as dynamic support/resistance area
I think moving average is the best trading strategy to follow because it gives traders trend-specific ideas.
Interesting that you only use MAs. Even more interesting you do not use MA xovers because of the lagging nature … but don’t MAs itself have the same lagging nature, so I’m confused.
How do you confirm a new trend as opposed to a fakeout without using other indicators (such as RSI, Stochastic, and or MCAD)??
Nothing against anyone that uses moving averages, but I find them to be a distraction and they really are not needed. Market structure can be used to identify the trend. It doesn’t take long to look at a chart and tell that price is generally going up, down, or sideways without needing to look at a moving average. Moving averages are like training wheels on a bike, once I knew how to ride, I found that I rode better with them removed.
The lagging nature of MA’s is not in itself a problem. It is simply a characteristic of MA’s that can either be a hindrance or an asset in determining the nature of current price change. It depends on how it is utilised and interpreted.
The limitation with MAs is that they are based on mathematical formulas. In order for an entry/exit crossover system to be consistent it would require trends to continually develop and decline at the same pace. i.e. they would look like nice smooth sine waves.
But we all know that some trends develop fast and others over a long period of time. Some trends develop smoothly whilst others have a string of pullbacks and consolidations along the way. There is also often a prolonged period of consolidation between trends. In addition, trends tend to end much faster than they started which results in a lot of the profit being lost before the exit crossover occurs. All these features disrupt the efficiency of a basic crossover system.
I use MAs as a visual aid to quickly indicate whether recent prices are generally and significantly moving faster or slower than earlier prices and in which direction. This is done very simply using a series of MA’s with shorter and longer periods.
There are two main components here: 1) the overall direction of the slope of the MAs, 2) the convergence/divergence of the short term MA’s compared with the long term MA’s.
There are a number of public strategies that are based on similar MA bands such as the Rainbow Strategy and GMMA (Guppy Multiple Moving Averages), both of which have, I think, appeared from time to time on this site over the years.
My own approach is a lot simpler to these but functions with the same principles. Whenever the market is consolidating/ranging the series of MAs compress towards each other. During this period I tend to look for a fixed profit target. But whenever a new move gets under way the MA’s start to widen and diverge from each other and steepen in direction. During this period a trailing stop may be more profitable than a fixed target… Once a trend starts to exhaust itself the shorter term MAs start to curl in towards the longer term MA’s. Naturally, whenever there is a change in trend direction, the MA band gradually flips over completely. It is this constant convergence/divergence/emergence within the band of MA’s that determines my actions.
I like it because it is extremely visual and easy to read. Whilst one can easily identify trends and consolidations after the event by looking back to the left side of the chart, we are actually trading the unknown development of the right hand side of the current price - and that is often assisted using some kind of technique for identifying the underlying theme behind the ever-fluctuating “noise” in price movement.
Another reason why I am comfortable with this is because it allows/requires a lot of own discretion in deciding if and when to enter and exit rather than just relying on a mechanical “when the red crosses the blue” approach! This means I can have an opinion on the market and simply wait for the MA¨s to confirm if/when it is happening (or not!) - or I can just go with the direction the MA band is suggesting
This is a very wordy explanation but I hope it helps?