Moving average indicator is one of the most accessible and widely used technical analysis indicators. Is it possible to make a profit with only the moving average indicator? You can get a great result, if you trade, following the rules.
Moving average indicator is displaying the average value of a specific currency pair over a specific period of time. For example, a trader can calculate the average price for the 50 days or 50 minutes. It all depends on the timeframe used by the trader. As the average value, the moving average can be used as a smoothed display of the current market activity and the dominant trend at the market. This smoothing effect is of great help to the trader, when he tries to get rid of the market noise or wants to see the current trend direction immediately.
Moving average indicator (MA) is present on all trading platforms. In the MetaTrader4, Moving Average indicator can be set as follows:
Settings of the Moving average indicator
Moving average basic signals
The crossing of two moving averages
This signal is interpreted as follows. When the fast MA crosses the slow MA bottom-up – this is a signal to buy. When the fast MA crosses the slow MA top-down – this is a signal to sell.
Price crosses the moving average (MA)
This signal is interpreted as follows. When the price crosses the MA bottom-up – this is a signal to buy. When the price crosses the MA top-down (as in the example above) – this is a signal to sell.
The described methods of using moving averages have some lagging. Since the price is appropriate for the signal to be confirmed, as a rule, the price passes far enough.
Experienced traders use another method in trading. Moving averages as strong levels (levels of support / resistance).
For the confirmation of the Moving average indicator signals, we recommend to use additional indicators. In particular, the stochastic oscillator with overbought-oversold zones. It can help to identify potential reversal points.