Of the many indicators available, Moving Average (MA) is the most popular trend indicator. Many errors on the use of this indicator, especialities for beginner traders.
Moving Average can actually be a powerful indicator if you can use it properly.
Moving Average (MA) is the simplest among other technical indicators, usually calculated from the sum of the closing price in a given period divided by the number of time units in that period.
If the price moves uptrend, the MA curve will move up wards, and vice versa at the downtrend price movement, the ma curve will move downwards.
What needs to be understood is that Moving Average is included in the repaint indicator or lagging indicator, so there is a weakness to predict the price with forex trading.
The use of MA to predict prices can’t be used separately with other indicators. You need additional tools when using a good MA strategy to predict price direction and use it as an entry level reference.
Although it includes a repaint indicator, MA is one of the most ideal indicators that can be used in trending market conditions.
There are 3 ways to use the MA indicator that is considered to be quite effective, ie as a trend filter, as a trigger for opening positions and identifying crossover points for confirmation of correction or reversal.
use of moving average indicator
Which is Better EMA or SMA?
The Moving Average indicator is divided into 2 categories: Exponential Moving Average (EMA) and Simple / Smoothed Moving Average (SMA). The difference between the two lies in the speed of change of direction.
EMA is faster in providing an indication of a change in price trend. The use of EMA can give more weight to the current data so it can provide faster signals.
- EMA Shorter Period Setting (8)
- EMA Short Period Setting (21)
- EMA Period Setting (125)
Explanation setting EMA period (8, 21, 125): Setting this period is quite popular used by institutional traders (hedge funds and investment banks). Is the Sequence of the Fibonacci Number. This period can be said to represent data Week, Month and Semester.
But more important is the combination of the (Multiple) periods can work well.