Surely, each of you has several working tools used in everyday trading. These can be just useful sources of information that you are studying before the start of the trading day, as well as various auxiliary filters that make your trading strategy for the fix apiforex market more accurate. Among the list of these tools, I would also highlight the technical indicator Moving Average. Some people use it within their strategy, but for me this indicator is a filter of market movement and price noise. But despite all this, a number of traders do not correctly interpret this technical indicator. Therefore, I propose to go into more details in the specifics of the most popular technical indicator on the financial market.
Everyone knows that the Moving Average is one of the simplest technical indicators (http://forexrobotshub.com/2017/05/19/trend-indicators/), as it is based on a simple formula that calculates the average price for n past bars. In fact, this is a line on the chart, which displays exactly the average value of the price. No more, no less. The popularity of this indicator caused the appearance of several more variations of this indicator. Thus, there are 3 types of Moving Average:
- Simple Moving Average – a simple moving average, which is calculated by dividing the cost of n bars by their number. Thus, we obtain the average value.
- Exponential Moving Average – the exponential average method is based more on the weight given to past prices, hence this indicator is more responsive to the current position of the quotes.
- Smoothed Moving Average – gives weight to the current prices depending on the selected period. For example, if you use SmMA with a period of 5, the current price will be given to the fivefold weight, the previous candle fourfold, and so on (https://mahifx.com/mfxtrade/indicators/smoothed-moving-average-smma).
Personally, for me it does not matter what kind to use, so I take the most standard one –the simplest one. After all, for me the period is important, and if I take a long period, then what I do, then we will not find a special difference between each of these kinds.
Then, how should you use MA in fix api trading?
Yes, of course, you need to take into account the position of prices by the ratio to the technical indicator. And if the quotes are higher than MA, then this indicates an uptrend. But why does no one look at MA itself? To begin with, you need to understand that there are some methods for determining the breakout of quotations of the indicator itself. If the value of an asset on the fix apiforex market breaks the MA line from the top down, while the MA itself is moving downwards, is it worth considering this trading signal as a fact of a new movement? My answer is “no” and this is a false breakdown. I do not recommend entering positions with this signal. But if the quotes of the asset declined, then moved into a corrective weak movement up. Thus. MA also starts to gradually change its direction and move into a lateral trend. Then, when the quotes break through the MA and the indicator itself starts to grow, this will be the confirmatory filter for opening the trading position.
A similar situation occurs when the quotes decrease and break through MA, which is growing. This tells us that the breakdown is false. But if quotes decrease and break through MA, which is also aimed downwards, then it is worth looking for a point for opening short positions in the fixapi forex market.
In this simple rule, the essence of using the technical indicator Moving Average is laid. Do not forget to look not only at the price itself, but also on auxiliary filters and the position of technical indicators. This approach will allow you to save capital and filter out false signals.