EURUSD 1.1856 USDJPY 111.61 USDCAD 1.2373 EURCZK 26.031 USDCZK 21.951 EURPLN 4.2726 USDPLN 3.6043
EURUSD 1.1856 USDJPY 111.61 USDCAD 1.2373 EURCZK 26.031 USDCZK 21.951 EURPLN 4.2726 USDPLN 3.6043

Start real trading in just 30 minutes

Start real trading in just 30 minutes

Micro-lots with no minimum deposit!

Open demo account MetaTrader5

Open demo account MetaTrader5

Opening demo account is the first step

Demo account in MetaTrader 4

Demo account in MetaTrader 4

All-time trading platform classic

For beginners

For beginners

Learn the basics of financial markets

Moving averages are the most basic tool that allows one to identify the market trend and its possible reversals

Rule of thumb

Moving averages can also be used as support and resistance lines

Moving Average is the most simple of the vast array of tools used for trend identification. It reflects the dynamics of the average market price in  a certain time period. How many observations are taken into account depends on the settings adopted.

 

moving average, trend, indicators

 

For example, a moving average with parameter 30, noted also as MA(30), will be a simple average  from the last 30 observations. The changes of the moving average value reflect the changes of the underlying market trend. The longer the period taken, the more smoothed the moving average is, and the trend identified refers to a larger time-scale. On the other hand, signals of the moving averages with higher parameters tend to have more time lag than the shorter ones.

 

Moving averages are easy to use, however they have certain limitations, as the information on the current trend and its reversal is typically delayed in respect to the actual market action. In order to overcome this problem, several variations of moving averages have been created, that use different formulas in order to reflect best the actual market tendency. The most common modifications include weighted and exponential moving averages, that attribute more importance to the most recent observations.

 

The most important method of application of the moving averages for trend identification is combining two of them together - a short-term and a long-term. Such tools  are capable of providing signals on upcoming ascending (buy signal) or descending (trend sell signal). Usually a buy signal is triggered when the short-term MA crosses above the long-term MA. The selling signal being quite the opposite, may be triggered when the short-term MA crosses below the long-term MA. Instead of short-term MA, a current market price may be used.

 

How to use it with MetaTrader 5:

  • Go to Insert - Indicators - Trend - Moving Average
  • Define  a period the moving average will be based on, e.g. 15 periods.
  • Select the method of counting the moving average: Simple, Exponential, Smoothed, Linear weighted. Feel free to experiment with any of them.
  • The Moving Average will be created automatically by MetaTrader 5

Pola oznaczone gwiazdką są wymagane.

zamknij