Trading Strategies
If you are looking for trading ideas or are simply looking to enhance your current strategy, then you have come to the right place.
Introduction |
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Risk Management and Trading Psychology |
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Taking a Fundamental Approach to Forex Trading |
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Taking a Technical Approach to Forex Trading |
Indicators
Optimize your Forex Trading With the Moving Average
The moving average is a trend indicator. The moving Average (MA) is on the most popular indicators in technical analysis. Due to its simplicity and clarity, MA gains a huge reputation in the sophisticated process of analyzing the multiple currency pairs of the foreign exchange market. The simple definition of moving average is the measure of the average price of equity or a currency pair over a specific period of time (n), where the value of (n) is the same value of the moving average parameters. Traders have a free hand set these parameters according to their trading strategies; thus, the most frequent values are 10, 20, 50, 100, and 200. The common rule is that the longer the time frame, the more reliable and less sensitive the trading signals. While the shorter the time frame, the less accurate and more sensitive the trading signals.
Basic Types of Moving Averages:
• Simple Moving Average (SMA)
• Weighted Moving Average (WMA)
• Exponential Moving Average (EMA)
Calculating Moving Average:
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SMA ca easily calculated by (1) adding the closing price of a currency pair at a given period (n) and (2) dividing the result by (n). For example, if the closing price of the AUD/JPY for the last 10 days are 80 - 81 - 81- 83 - 82 - 82 - 83 - 84 - 84 - 83, the value of SMA will be 82.30 |
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The mathematical formula for the other types of MA are very complicated but the good news is they can be automatically obtained thought any advanced charting package such as Metatrader. |
Suggested Strategy:
1) Highlighting the direction of the trend;
Plot 5-SMA, 10 -SMA, 20- SMA, and 100 - SMA on the chart;
An uptrend is developing if the current price of a currency pair is above the short SMA and the Short SMA is above the long ones
A down trend is developing if the current price of a currency pair is below the short SMA and the short SMA is below the long ones.
2) Pinpointing Support and Resistance Levels
*In a rising market, SMAs will act as support levels
*In a falling market, SMAs will act as resistance levels
