MA himself is an indicator of a trend, i.e. the indicators used to determine the trend is happening in the market. Its use is extensive not only in the world of forex, if you never played the stock and using technical analysis, then for sure MA is also used there. Anyway does technical analysis is universal and can be used in the sfemua market which uses the collective data.
MA also can be lowered again became the new indicator and completely different from the original indicator. The next time you start to learn the MACD (Moving Average Convergence Divergence) then you will know that this one is any indicator, originally also from MA (just look at the name).
The Moving average has three different variants of the Simple Moving Average, Exponential Weighted Moving Average and the Moving Average. Each is a method of moving average, it's just the way me roll out his averages are different from each other. But in his reading remains the same and all applicable rules on soon followed, Moving Average. In fact since the early 2000 's, the Moving Average is not only growing in 3 variants, but being more than 5 variants tailored to its purpose only. But to narrow the space of discussion and facilitate you in menginterprestasikan MA, the discussion only focused on these three types of MA.
Simple Moving Average (SMA)
Simple Moving Average (or commonly called Moving Average only or also abbreviated SMA) is the most simple Moving Average and not using and weighted in the calculation of the movement of the closing price.
Note the picture of Simple Moving Average with the period 10 may refer to:
Though simple, effective enough in SMA to determine the trend is happening in the market. One simple way of reading.
Generally MA can be used for the following:
- Determine thetrendthat isgoing to happen.
- Determine thepoints ofsupport and resistance.
- Smooth theother indicatorsare toojagged.
MA applications most widely used to predict the direction of the trend while the usefulness of the No. 2 and 3 not too widely used. This time the usefulness of the MA will emphasis is focused on its main purpose is to predict the trend. Whereas the usefulness of the No. 2 will be discussed in its own article will be inserted later.
Now let us look at MA with periods of 10 who applied on the GBP/USD 1 day period as follows:
Note the part that has been diraster with the color blue. When the price moves up, MA is under from currency movements. On the contrary when MA intersect with candlestick, rising trend stopped and continued with the situation of sideways. Or when the trend goes up and then MA through price and moved from below to above, it is a sign that the rising trend has ended and then continued with the trend is down.
Well, what if we use two SMA with two different periods? The results will be very interesting. We'll soon find out how the result:
More easy isn't it? With the use of two SMA in two different periods, we can more accurately predict where prices will again move. If there has been a price between the intersection with both HIGH SCHOOL then it would certainly price it changed direction. In the image above, if MA with smaller period – i.e. period 10 if in the pictures below from the MA period is larger-the image is represented by a period 15-then that is an indication of the price of being in the trend is down and vice versa when the period is smaller on top of a larger period then the currencies currently in trend trend rising.
Can we noted also that in the range between the two SMA getting bigger then it is likely the trend will continue and when a moment of a narrowing of the distance between them and until the intersection occurs again, it can be inferred that the boom is over. Easy isn't it?
About the MA period used, unfortunately until now there has not been a proper period search rules to wear. Does need a lot of practicing and trying (trial and error). You need to take note that the use of the period can vary according to the needs of the same pair though because it is a condition of a currency is a dynamic of time kewaktu. But based on experience, it is recommended to use a period no greater than 40. This meant that MA did not lose the deciding sensitivitasnya as an indicator of the trend.
The greater period of MA MA resulting curve then will be more wide and insensitive in accommodating changes in prices. Conversely, the smaller the period MA MA resulting curve then become increasingly more sensitive. In this case too sensitive or not sensitive at all is not a good thing. The more sensitive a curve MA then more frequently false signals generated and make our trading loss. On the contrary, the more sensitive it is not a purchase or sale signal is becoming increasingly less resulting in we can't trade.
Well, more details have been extracted by BelajarForex regarding the use of SMA to read trends in form to table as follow:
SMA was under the price = Condition of the bullish trend to rise.
SMA is over price = Condition of the bearish trend is decreasing.
SMA cut prices from above= The change trend bullish menuu
SMA cut prices from below = A change of the trend towards a bearish.
Shorter periods of SMA cut
SMA period is longer than the bottom= A change of the trend toward bullish.
Shorter periods of SMA cut SMA period is longer than the upper = A change of the trend towards a bearish
SMA with a longer period to be over shorter berperiode SMA= Condition of the bearish trend is decreasing.
A concise explanation of the well that Moving Average. Don't forget to read other articles from this website to extend Your analysis knowledge.
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