Moving Averages to identify trends

Moving Averages

Moving Averages are among the most popular indicators in technical analysis. They smooth the price development over time and make it easier to identify trends. This can be particularly useful in volatile times.

There are two types of moving averages:

Simple moving averages (SMAs)
SMAs calculate the average price development over time.
If we have for example five daily bars that close to the prices 10,15,20,25,30, the SMA has the value (10 +15 +20 +25 +30) / 5 = 20 If the price rises on 6 To 100 days now, has the value of the SMA (10 +15 +20 +25 +30 +100) / 6 = 33.34.

Exponential Moving Averages (EMAs)
EMAs SMAs as well as calculate the average price development, but with the difference that a greater emphasis on the past short rates. The calculation is fairly complex and I did without further explanation here, since most trading programs automatically calculate the EMAs in seconds.
Moving averages are among other property, often to react as resistance and support. As you can see from the attached chart, the price is 5 times in the vicinity of the 150 EMAs come and jump back. This could be concluded that we were still on the rise. So if we had found in the vicinity of the 150 EMA line ups good to buy, we had always been in excellent trades.


In addition, Moving Averages can show us whether we are still in fashion, or whether a change has taken place. Once again, we can again use the 150 Exponential Moving Averages (EMAs). As the chart from March to July was in a sideways trend began to flatten the slope of the EMAs. Finally, the price began to break through the Exponential Moving Averages (EMAs) and was pointed out very strongly to the bottom. The breaching of the Exponential Moving Averages (EMAs) was also an indication of a trend change. Long-term traders could set their stop loss below the moving average, as long as possible in order to remain in vogue.

For many Forex traders popular moving averages are the 150 and 365 EMAs because they often act as support and resistance and show long-term trends.