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Indicators in MT4

This is a discussion on Indicators in MT4 within the HowToBasic forums, part of the Announcements category; How to choose a moving average to trade with A trader can choose a moving average based on the time ...

          
   
  1. #21
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    How to choose a moving average to trade with

    A trader can choose a moving average based on the time frame that he is trading; the trader might choose the moving average to measure minute chart, hourly charts, day charts or even weekly.

    The trader can also choose to average the closing price, opening price or median price.

    Moving average is commonly used devices to measure strength of trends. The data is precise and its output as a line can be customized to ones preferences.

    Using the moving average is one of the basic ways to generate buy and sell signals which are used to trade in the direction of the trend, since the moving average is a lagging and a trend following indicator. The Moving average indicator as a lagging indicator means that it will tend to give late signals as opposed to leading indicators. However, the Moving average as a lagging indicator gives more accurate signals and is less prone to whipsaws compared to leading indicators.

    Traders choose the moving average period to use depending on the type of trading they do; short-term, medium-term and long-term.

    • Short-term: 10 -50 Period Moving Average
    • Medium-term: 50 - 100 Period Moving Average
    • Long-term: 100 - 200 Period Moving Average


    The period in this case can be measured in minute chart, hourly charts, day charts or even weekly. For our example we will use 1 hour period.

    Short term moving averages are sensitive to price action and can spot trends signals faster than the long term moving averages. line more closely than a long term (200 period) average. Shorter term moving averages are also more prone to whipsaws compared to long term ones.

    Long term averages help avoid whipsaws, but are slower in spotting new trends and reversals.

    Because long term moving averages calculate the average using more price data, it does not reverse as fast as a short term moving average and it is slow to catch the changes in the trend. However the longer term moving average is better when the trend stays in force for a longer time.

    The work of a trader is to find a moving average that will identify trends as early as possible while at the same time avoiding fake-out signals (whipsaws).

  2. #22
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    Short-term Forex Trading with Moving Averages

    Short term trading will use short period moving averages such as the 10 and 20 moving average.

    In the example below we use 10 and 20 moving averages to generate Forex signals; the signals generated are able to identify the trend as early as possible.

    Indicators in MT4-short1.png


    Scalper Trading Using Moving Averages

    One of the most widely used method of technical analysis used to trade price fluctuations in scalp trading is the use of moving averages. moving averages is an indicator that provides a profitable chart structure for scalp trader.

    The idea behind moving averages is to simply enhance analysis before taking a signal to enter the market. Planning and setting goals in the short-term according to moving averages helps a trader to identify interests in the market and thus trade accordingly.

    Most of the targets can be established using a specific period on MA. The moving averages determines whether the trader will scalp in a short-term long-term. In addition, the price action above or below the price determines the state of the market for the trading day.

    If a large part of the price action is considered to be below the MA, then bias trade/forex trend for the day is short. Most traders the use the MA as support or resistance to determine where to enter a trade, if price touches the MA in the direction of the forex trend a trade is then opened.

    The moving averages are plotted and the intersection point with the price action can be used to determine the appropriate entry and exit times in the market. Since there is always oscillation in the forex trends and activities of the price action on the market, the price will repeat this process of oscillating and bouncing off the MA and this can be used to generate forex trading signals.

    Scalp trader use moving averages define the price floor in an upward Forex trend and price ceiling in a downward Forex trend.

    Simple moving averages are calculated and their approach is based on the observation of price within a particular period of time using sufficient data to calculate the moving averages is what moving average are all about? The interpretation of the moving averages has provided many scalp traders with lots of tips on how and when to trade a currency.

    Medium-term Trading with Moving Average

    Medium term trading will use the 50 period MA.

    The 50 period MA acts as support or resistance level for the price.

    In an uptrend the 50 period MA will act as a support, price should always bounce back up after touching the MA. If price closes below the MA then it is an exit signal.

    Indicators in MT4-short2.png


    50 period MA Support

    In a downtrend the 50 period MA will act as a resistance, price should always go down after touching the moving average. If price closes above the moving average then it is an exit signal.

    Indicators in MT4-short3.png


    50 Day Moving Average Analysis in the Forex Market

    As your currency pair moves up in price, there is a key line you want to watch. This is the 50 day moving average. If your currency pair stays above it, that is a very good sign. If your currency pair drops below the line in heavy volume, watch out, there could be reversal ahead.

    A 50 day MA line takes 10 weeks of closing price data, and then plots the average. The line is recalculated everyday. This will show a currency pair's price trend. It can be up, down, or sideways.

    You normally should only buy currency pairs that are above their 50 day MA. This tells you the currency pair is trending upward in price. You always want to trade with the trend, and not against it. Many of the world's greatest traders, past and present, only trade or traded in the direction of the trend.

    When a successful currency pair corrects in price, which is normal, it may drop down to its 50 day MA.

    Winning currency pairs normally will find support over and over again at that line. Big trading institutions such as mutual funds, pension funds, and hedge funds watch top currency pairs very closely. When these big volume trading entities spot a great currency pair moving down to its 50 day line, they see it as an opportunity, to add to, or start a position at a reasonable price.

    What does it mean if your currency pair price slices downward through its 50 day line. If it happens on heavy volume, it is a strong signal to sell the currency pair. This means big institutions are selling their shares, and that can cause a dramatic drop in price, even if fundamentals still look solid. Now, if your currency pair drops slightly below the 50 day line on light volume, watch how the currency pair acts in the following days, and take appropriate action if necessary

    Long-term Trading with Moving Average

    Long term trading will use long period moving averages such as the 100 and 200 moving average.

    These moving averages act as long term support and resistance levels. Since many traders use the 100 and 200 moving averages price will often react to these support and resistance levels.

    Indicators in MT4-short4.png


    Learn about the 200 day MA

    In Forex Trading, investors can use both fundamental analysis and technical analysis to help determine whether a currency pair is a good buy or sell.

    In technical analysis technique traders looking to gauge supply and demand for a currency use the 200 day moving average to examine data in different ways.

    Traders are most familiar with the basic analysis of MA. The 200 day moving average is used to plot the long term support or resistance level. If price is above 200 day MA then price is bullish, and if it is below then it is bearish.

    One of the ways to measure supply and demand is to calculate the average closing price over the last 200 trading sessions. this accounts for each day going back in time and shows how this 200 day average has moved hence the term 200 day MA.

    The reason why the average 200 day MA in particular is so popular in technical analysis is because historically has been used with profitable results for trading in the forex market. A popular timing strategy is used to buy when price action is above its moving average of 200 days and sell when it goes below it.

    With individual currency pairs, investors can benefit from being notified when a currency pair rises above, or falls below its 200 day Moving Average and then use fundamental analysis to help determine if the signal is an opportunity to go long or short.

  3. #23
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    20 Pips Price Range Moving Average Forex Strategy

    The 20 pips price range moving average strategy is used with the 1 Hour and 15 minute Trading charts. On this chart time-frames we use the 100 and 200 simple moving average indicator.

    Both the 1 Hour and 15 minute chart time-frames will use the 100 and 200 SMA (SMA Indicator) to determine the direction of the Forex trend.

    The 1 Hour chart time-frame checks the long term direction of the Forex trend, upward or downward trend, depending on the direction of the moving averages. All trades taken should be in this direction.

    We then use the 15 minute price chart to find the optimal point to enter trades. Trades are opened only when the price is within 20 pips range of the 200 simple MA, if price is not within this pip range trades are not opened.

    Buy Signal - Forex Uptrend/Bullish Market

    To generate Forex buy (bullish signals) using the 20 pips moving average Forex trading strategy, we shall use the 1hour and 15 minute chart time-frame.

    On the 1 hour Forex chart time-frame the price of the currency pair should be above both the 100 and 200 simple moving average. We then move to a lower chart time-frame, the 15 minute chart time-frame to generate a trade signal.

    On 15 minute chart time-frame, when price reaches the 20 pips range above the 200 SMA, we open a buy trade and place a stop loss 30 pips below the 200 SMA. Stop loss can be adjusted to the amount of Pips that are suitable for your risk but to avoid being stopped out by normal Forex volatility its best to use 30 pips stop loss.

    A buy trade can also be opened when price touches the 100 Simple moving average, provided its not very far from the 200 SMA. Normally the 100 SMA will be within the 20 pips range of the 200 SMA.

    Indicators in MT4-20_1.png


    Sell Signal Forex Downtrend/Bearish Market

    To generate Forex sell (short signals) using the 20 pips moving average Forex trading strategy, we shall also use the 1hour and 15 minute chart time-frame.

    On the 1 hour chart time-frame, the price should be below both the 100 and 200 simple moving average. We then move to the 15 minute chart time-frame to generate a Trading Signal.

    On 15 minute chart, when price reaches the 20 pips range below the 200 SMA, we open a sell trade and place a stop loss 30 pips above the 200 simple moving average.

    Indicators in MT4-20_2.png


    With this method price will generally bounce of these levels because many traders watch these levels, and open similar trades at around the same point.

    These levels act as short term resistance or support levels within the currency price charts.

    Profit Taking level For This Trading Strategy

    With this trading strategy the price will bounce and make a move in the direction of the original Forex trend. This move will range from 70 - 100 pips.

    The best profit taking level would therefore be considered to be 80 pips from the 200 simple moving average.

  4. #24
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    A Winning Strategy Using Moving Average & Average True Range



    Moving Average & Average True Range - A Winning Strategy :

    In any trading, whether you trade Stocks, Future or Forex, the first key of success is having a good Strategy, which provides good result. Second most important key is Discipline and third key is Money Management.

    In this article, we will discuss about a strategy based on Moving Average and ATR, which gives me 50 – 100 PIPS per trading day in just 2 Hours. So let us come to point.

    We need few things on our chart before we explain the strategy:

    1. Time Frame: Minimum 15 minutes and above.

    2. Moving Averages: 14 SMA Low Price (Yellow),
    14 SMA High Price (Blue).
    [SMA - Simple Moving Average]
    3. Average True Range: Period 14
    4. Support and Resistance


    Now look at below Charts:

    Indicators in MT4-image541.jpg


    Short Position Illustration

    Indicators in MT4-image541_1.jpg
    2: Long Position Illustration

    Trade Setup:

    First look at ATR. Is it greater than 0.0013? Yes. Great! When Candle close above Blue moving average, at the opening of next candle we will buy and when candle close below Yellow moving average, at the opening of next candle we will sell. Is not it simple?

    This can be applied on any currency pair, and mostly I trade it with USD pairs, i.e. EURUSD, GBPUSD, & AUDUSD.

    Here it is :

    We will use ATR value to set our take-profit and stop-loss level.

    Stop Loss level:
    (ATR Value*1.5 + Trade open price) + 10 PIPS

    Take Profit Level:
    (ATR Value*3 + Trade open price)

    Manual exit of trade :

    - For Buy Entry : If Candle closes below yellow moving average.
    - For Sell Entry : If candle closes above blue moving average.

    Look for a trend on longer time frame, and find Support and Resistance. If you get any signal near to Support and Resistance level, never enter into the trade. There is a good proverb for trading is : "Trend is your friend."


    # Important points to remember :

    1. Avoid News release time
    2. Don't trade without Stop-Loss and Take-Profit
    Target
    3. Keep Learning

    The winner and looser in a trading is "how do you control your profits?" The typical trader watch out a trade every moment and most of times, they make wrong decision and in a winning trade, close the trade only with few PIPs gain, and wait for market to turn-back, when they are in loosing position. Therefore, you do not need to watch out a trade, whether you are a newbie or experienced trader. If you have done your analysis, then trust your analysis.

  5. #25
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    Moving Average Forecasting: What You Need to Know

    How do you spot developing investment trends? "Moving Average Forecasting" articulates three key steps for risk-averse investors. As part of the Strategic Investor Spotlight Series, "Moving Average Forecasting" teaches you how to opportunistically identify important financial market trend signals.



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    Time Series- moving averages

    Maths Doctor provide one-to-one live online tutoring.


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    Forex Trading Strategy - Day Trading Moving Averages

    This is about 200 period MA


  8. #28
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    Moving Average and MACD Combo Strategy from BK Forex


  9. #29
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    How to Trade Moving Averages Like a Pro

    As moving averages are lagging indicators they tend to work well in identifying and following a trend and not to work well in ranging or trend less markets. Because of this traders will often use them to trade with the trend as well as to identify potential areas of support or resistance which may result in a continuation or reversal of a trend.

    The most basic way that traders will use moving averages is to identify and then trade with the trend of a particular instrument. Although most traders will probably want to use the moving average in conjunction with some of the things that we have learned so far and some of the things we will learn in future lessons, the most basic way to trade using just the moving average is to buy when the price of a financial instrument breaks above the moving average line and sell when the financial instrument breaks below the moving average line. For confirmation traders will often wait for a full bar to close above the moving average line before entering long and a full bar to close below the moving average line before entering a short position.

    A second way that traders use moving averages is to identify areas of support or resistance and then trade the break of these levels, looking for a potential reversal of the trend. When a financial instrument has shown a particular moving average level to be significant from a support or resistance standpoint in the past by testing the moving average line several times, and then breaks that level, traders will often see this as a warning sign that the trend is reversing and position themselves according

    The last way that traders will using moving averages is by plotting a longer term moving average and a shorter term moving average on a chart and trading the cross over. The idea here is that the shorter term moving average will be faster in identifying changes in the trend and therefore traders will look to get long when the shorter term moving average crosses above the longer term moving average and short when the shorter term moving average crosses below the longer term moving average.



  10. #30
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    Moving Average Shift, What It Is And How It Works




    15 Ways To Manage Opportunity Through Moving Averages

    1. The 20-day moving average commonly marks the short-term trend, the 50-day moving average the intermediate trend, and the 200-day moving average the long-term trend of the market.

    2. These three settings represent natural boundaries for price pullbacks. Two forces empower those averages: First, they define levels where profit- and loss-taking should ebb following strong price movement. Second, their common recognition draws a crowd that perpetrates a self-fulfilling event whenever price approaches.

    3. Moving averages generate false signals during range-bound markets because they're trend-following indicators that measure upward or downward momentum. They lose their power in any environment that shows a slow rate of price change.

    4. The characteristic of moving averages changes as they flatten and roll over. The turn of an average toward horizontal signifies a loss of momentum for that time frame. This increases the odds that price will cross the average with relative ease. When a set of averages flatline and draw close to one another, price often swivels back and forth across the axis in a noisy pattern.

    5. Moving averages emit continuous signals because they're plotted right on top of price. Their relative correlation with price development changes with each bar. They also exhibit active convergence-divergence relationships with all other forms of support and resistance.

    6. Use exponential moving averages, or EMAs, for longer time frames but shift down to simple moving averages, or SMAs, for shorter ones. EMAs apply more weight to recent price change, while SMAs view each data point equally.

    7. Short-term SMAs let traders spy on other market participants. The public uses simple moving average settings because they don't understand EMAs. Good intraday signals rely more on how the competition thinks than the technicals of the moment.

    8. Place five-, eight- and 13-bar SMAs on intraday charts to measure short-term trend strength. In strong moves, the averages will line up and point in the same direction. But they flip over one at a time at highs and lows, until price finally surges through in the other direction.

    9. Price location in relation to the 200-day moving average determines long-term investor psychology. Bulls live above the 200-day moving average, while bears live below it. Sellers eat up rallies below this line in the sand, while buyers come to the rescue above it.

    10. When the 50-day moving average pierces the 200-day moving average in either direction, it predicts a substantial shift in buying and selling behavior. The 50-day moving average rising above the 200-day moving average is called a Golden Cross, while the bearish piercing is called a Death Cross.

    11. It's harder for price to break above a declining moving average than a rising moving average. Conversely, it's harder for price to drop through a rising moving average than a declining moving average.

    12. Moving averages set to different time frames reveal trend velocity through their relationships with each other. Measure this with a classic Moving Average-Convergence-Divergence (MACD) indicator, or apply multiple averages to your charts and watch how they spread or contract over different time.

    13. Place a 60-day volume moving average across green and red volume histograms in the lower chart pane to identify when specific sessions draw unexpected interest. The slope of the average also identifies hidden buying and selling pressure.

    14. Don't use long-term moving averages to make short-term predictions because they force important data to lag current events. A trend may already be mature and nearing its end by the time a specific moving average issues a buy or sell signal.

    15. Support and resistance mechanics develop between moving averages as they flip and roll. Look for one average to bounce on the other average, rather than break through it immediately. After a crossover finally takes place, that level becomes support or resistance for future price movement.


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