Simple moving average

Beginner Questions
1

Hello to all. This is my first question.

I don’t really understand moving averages. I understand the concept but I don’t understand how to read it. If for example, I’m using a 5 period SMA, and I am looking at the current candle that is traded, does the SMA line drawn below the candle represent the average price of the last 5 candles. So it smooths out the last 5 candles and shows it underneath the current candle? And on the next candle, it smooths out the price for the last 5 candles, including my previous candle.

Or to say it better, does SMA line at each it’s point show average price for the last 5 candles?

Tnx, I kinda got confused by this

2

Yes.

Unless you set it up differently, it will show at each point the average closing price of each of the (five, in your example) bars.

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3

32407156_623733911327448_3536958980469293056_n.jpg1812×1344 88.6 KB

Thank you very much. Could you take a look at this image and confirm to me please, that the dots (I randomly put it where the arrow is pointing) are showing the average price for the given periods? Or better, at any place in the MA timeline it shows the average price for the last X periods?

Tnx so much

4

Yes, that looks correct. (Note, again, that it’s the average closing price of each of the last ‘n’ bars/candles, unless specified otherwise.)

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5

Thank you very much for the clarification. I owe you one.

6

I see, you already got you answer! By the way, don’t depend on only one type of trading tool, never & ever.

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7

Tnx Luke. I get it that the more signals you get, the better the chances of a right prediction.

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8

Exactly, it is! Hope for the best! Happy practicing.

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9

After u have solid entry and exit rules,
U must find the most appropriate Risk management for ur trading system,
How much pips from entry so u can accept ur trading idea is invalid and close ur loose.

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10

Moving average is the simplest and mostly used indicator in the Forex trading. It tells the trend of the market by averaging the price levels in the recent periods of the time according to your time frame. You can change the number of entries in the moving average. It is a lagging indicator!

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