Indicator "Average sliding" in Forex

Trading in the foreign exchange market is a risky occupation. To reduce the likelihood of losing trades, traders use technical analysis tools. One of the tools is the "Medium Moving Average" indicator.

The opinions of experienced players on the need to apply any additional constructions on the graph are contradictory. Some believe that the numerous lines, strips and histograms on the price chart field create confusion in the players' minds. Such gurus are advised to throw aside all the "turkeys" and work only with the price schedule.

Other gurus are reminded of a fable about a monkey and glasses and are advised to thoroughly understand at least one simple technical tool, understand its positive aspects and test the theory with practical application.

One of such simple and useful suppliers of signals to the transaction is the indicator "Average sliding".

Formal definition

The moving average is the average price of an exchange asset for a fixed period of time.

The parameter is used as the base parameter when forming the remaining indicators based on moving averages.

The time interval is counted in the charting figures: candles or bars. The phrase "moving average with a period of 15" means that the graph will be constructed a line of average values for each consecutive 15 bars or candles.

Suppose the first 15 elements were formed. On their basis, the average price was calculated. When the sixteenth candle is formed, the first figure is discarded, candles 2 through 16 are taken into account.

When the seventeenth candle is formed, the actions are repeated. And so calculations are made for the entire array of graphics.

When trading on the terminal manually constructing indicative lines do not. Drawing of lines is automated in trading programs MT4 and MT5. Therefore, the article will not have mathematical calculations. Interested parties have the opportunity to read help information in the help section while there is free time between transactions.

In the program, you can select any interval to calculate the average price of a currency pair. Periods from 5 to 50 are called short-term. To make an investment decision when buying or selling a currency, you should analyze the periods from 120 and above, as the most revealing ones.

Types of signal lines

For example, a candlestick chart of an asset with a blue moving average line with a short period of 20 is shown.

The candle reflects the four price parameters:

• Value at the time of opening;
• Value at the close;
• Minimum value for the period of formation;
• The maximum value.

Accordingly, you can set the construction of the average opening or closing prices, the minimum or maximum values. You can even make a calculation of the moving average values of each candle.

The settings of the trading program take into account the aesthetic preferences of the customers and give the opportunity to choose the thickness and color of the line, as well as the shapes - solid, dotted or dotted.

According to the mathematical method of construction, four types of technical indicator of the moving average are classified. For brevity, we will denote the line by the abbreviation MA - from the generally accepted term of the Moving Average in the technical analysis.

1. Simple AI.
2. Exponential MA.
3. Linearly weighted MA.
4. Smoothed out AI.

Classification occurs by assigning a rank to candles to perform calculations: the most significant and least significant candle.

Characteristics of the commonly used Moving Average

Let us consider four types of indicator in more detail. The two moving averages are applied continuously and efficiently. The other two are used in rare cases.

присваивает первой и последней свече в периоде одинаковую значимость. Simple AI assigns the first and last candles in the period equal importance. That is, on the interval 15 the first candle is the fifteenth in importance. For this reason, the reaction in simple MA is slow, and at short distances the average moving average indicator works with a long delay. A simple MA shows itself well for long periods.

плавно присуждает значимость свечам в обратном порядке: последняя – самая значимая, первая – аутсайдер расчетов. Exponential MA smoothly awards the importance of candles in the reverse order: the latter is the most significant, the first is the outsider of calculations. So the line reduces its own sensitivity to price fluctuations at the beginning of the period and strengthens at the end. Therefore, the line reacts to the graph array faster than a simple MA.

The figure shows the schedule of the exchange's asset. The graph shows exponential moving averages: blue for short periods, red for long periods. At the point of their intersection, signals are generated for the sale of Sell Crossover and for the purchase of Buy Crossover.

Rare types of signal lines

по принципу отбора похожа на экспоненциальную, но есть нюансы. Linearly weighted AI by selection principle is similar to exponential, but there are nuances.

The significance of the candlesticks of the exponential decreases smoothly: n, n-1, n-2 ... n-14, 0, for example, at period 15.

The linearly weighted MA of each candle gives weight also in the reverse order, but more sharply: 8n, 4n, 2n, n, n / 2, ..., and so on until the end of the candle array. This line is very dependent on the change in the price of the exchange's asset.

The smoothed MA interesting forms the interval for calculations. Not only candles are taken in the current designated period, for example 15 candles. The previous intervals are also taken into account. But for them, the significance decreases with distance from the current time interval. Such a smoothed signal is appropriate only for determining long-term trends. But because of the large volumes of calculations, the line is stationary, and it is rarely used, mainly to study techniques for technical analysis.

All four types of the "Medium Moving Average" indicator are presented for general development. In practice, players use exponential MA to identify short-term trends; A simple MA is suitable for long-term forecasting.

The number 15 is chosen for an example of a short period. In practice, other intervals are used, shorter or longer, for example, 8 candles or 21 candles.

At long intervals for the construction of MA select the year - 365 days, or six months - 180.

Attach MA to Trade

The purpose of the analytical construction of additional lines on the price chart is to determine the point of scrapping the trend. In the Forex market the indicator "Medium moving" is the most efficient tool.

We introduce the concept of "fast" for lines on short periods and "slow" for lines on long periods.

A trend slope occurs at the intersection of fast and slow MA. The figure shows the asset graph with the intersection of two middle lines, fast with a period of 50 days and a slow one with a period of 20 days.

In the trend market, the rules are:

1. Fast crossed the slowest from top to bottom - you have to sell, the price will fall.
2. Fast crossed slow from bottom to top - you have to buy, the price will increase.

In markets with increased volatility, many noise movements are created, so the rule can stall.

It should be remembered that the lines give a delayed signal. Therefore, to enter the purchase transaction, the indicator of moving average crossings should not be used. Due to the late arrival of the signal, the trend may lose strength. The player will buy, and the price will grow by a little and go down, so that the market participant will not have time to react and put the burden on time. In order not to save losses, the crossing should be used only for sale.

Tilt angle MA

To decide the strength of the trend, you can use the angle of the line. Angle is used for long periods, above 21. The longer the period, the steeper the angle, the more pronounced is the strength of the trend.

The price of currency pairs on Forex is not only growing or falling, but also in lateral movement. Evaluation of the indicator of the slope of the moving average helps to determine the trend towards lateral movement.

When trading on the strategies of crossing the averages of sliding adjust the indicator MA Angle. As a signal source to the action is not used, but as the picture improves the perception of the situation on the monitor screen.

The use of angle

The indicator has the form of a color histogram with a central line, located below the graph. The color spectrum of the histogram is standard:

• Green color - growth.
• Red color - decrease.
• Yellow color - movement in the outset, flat.

For example, consider the chart of the euro-dollar pair. The average sliding is painted in gold. Under the sliding, in addition to the histonramma, arrows of the angle of inclination are drawn and signed:

• Green rising - a signal of growth;
• Yellow flat - outset;
• Red falling - decline.

The more intensive the growth of the price of the exchange's asset, the higher the column of the chart, and vice versa, with a decrease in the growth rate, the height of the column decreases.

The higher the rate of price growth, the steeper the angle of the MA line, the stronger the trend - the player can hold a position or gain a pose.

The lower the rate of change in prices, the smaller the angle of inclination of the MA, the weaker the trend.

With an angle tending to zero, you can only trade "for the rustle of nuts."

Trading systems for assessing the signal to complete transactions are adjusted to an angle in the range from 15 ° to 35 °. Adjustment of the indicator of the slope of the moving average can be made for each exchange asset separately.

Dynamic Observer

Consider the daily chart of the price of the pound-dollar currency pair, hung with three sliding ones: short 10 and 20, with a length of 200. It can be seen that in a strong trend, the price can not break through the lines, pushes away from them, and the trend of the price movement remains. That is, the sliders act as support and resistance lines. And the lines are dynamic, as they move behind the price of the asset.

Sliding can be used as levels for arranging stop-loss. Put stops outside the lines. When approaching the current price, stops are rearranged.

Again: do not use the intersection point of the fast and slow line for purchases, either on short-term or long-term transactions. Have seen the intersection - go out, this is indicated by the indicator. Two moving averages crossed - this is to change the trend.

If the fast and slow crossed, the player closed the deal, and at that time the price crossed the average, it is necessary to see how long the price will be above the resistance level or below the support level.

False breakdown is formed by one candle. If the price draws three or four candles above or below the average, then the probability of a trend change is high. Why not 100% confidence in the change? Because we need to look at the average period. The longer the period, the more likely the change of trend in the breakdown. In small periods, the value of the moving average is also small.

Notification signals

World stock exchanges open at different times. There are periods of coincidence of hours of work, when you can pinch a piece of profit from a currency pie.

News clocks are also different. The flow of important events in each region is broadcasted at a certain time.

The price can move in the right trader for several hours during the trading session.

These three reasons make the player stick to the monitor and waste time waiting.

Alert - sound notification function of the trading terminal will help to correct the situation.

How to install the reminder

You can install a notifier in the trading terminal in two ways:

1. On the screen with tradable currency pair choose the menu "Trade", and in it the option "Alert" and bring the cursor to the price line. The notifier is installed instantly.

2. At the bottom of the screen, select the "Alerts" tab, select "Settings" and fill in the dialog box. The program offers a choice of 3 trigger conditions for the notifier:

• The price approached the Bid purchase level;
• The price approached the Ask sales level;
• The arrival of the specified time.

When the alarm is triggered, the following actions can be configured:

• Sound signal; Sound;
• Activation of the File;
• Sending an email to Mail;
• Sending correspondence to the mobile terminal Notifications.

It is convenient to use an alert when planning an entry or exit point. Many programs have been developed for the indicator, moving averages with an alert. In addition to graphical display in the form of arrows above or below the intersection of the middle lines, the user receives a beep.

When trading on Forex, the indicator with the alert is used for short periods and with a pronounced trend, because with lateral movement many false positives are obtained, and for long periods from half an hour the signal comes with a delay.

A couple of words in the end

In conclusion, we note: before starting work on a real account, any theory of technical analysis, even with the most positive feedback, check on demo accounts. Having mastered the lesson and having carried out the test work, the user can begin enrichment in the foreign exchange market with the use of simple and useful moving averages.