Moving averages comprise of one of the widely used technical indicators in forex trading. Moving average will help the bus to track the general trend of prices of a currency. It’s called as moving average since it includes new information on prices, as it grows.
The main purpose of moving averages is to provide you a very simple overview of the development. The moving average would decrease the amount of “noise”,and chart andwould give you a single direction based on your business.
Time period Options
Moving averages comes in various flavors. They could be adjusted to the average you need. If you are making your trade on the hourly chart, then you can define a moving average which would contribute you average price over last 8 hours. This is what is known as average of 8 period moving average. Traders would formulate their own theories about what the best job on average for them. It is best to go through an experiment with various settings till you find one which makes sense for you.
Different moving averages
Simple Moving Average ( SMA )
A simple moving average is simplest way of the moving average. This is because It tracks only the price data as it happens, and gives you the direction of the average based on the time that you choose.
Weighted Moving Average ( WMA )
Weighted moving averages concentrates on price action which is most currently existing. Moving average of line considering the recent price trend to be important more than that of the older price changes. This is also generally termed as exponential moving average, or EMA.
But Using moving averages alone do not capture all of the solution, but would help you to determine the overall development. If used as an adjunct with other technical indicators which is favorite to you, then they would be a real asst to any trading system.