Forex Moving Averages: Which Ones?!

Forex Moving Averages come in a variety of different shapes and size. No doubt you will have seen or heard about Simple Moving Averages (SMA) or Exponential Moving Averages.

Before introducing the rest of the family - let's have a quick recap...

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Simple Moving Averages
If you want to keep it 'simple' an SMA is for you. Using a number of x price points you simple add the up and divide by the number of price points. Confused?

SMA = p1 + p2 + p3 + p4 + p5 / 5

You add up your last 5 closing prices and divide by 5. The number of price points you work with to calculate the average is down to you. The smaller the number, the faster the SMA will move. The longer (eg. 20 SMA) the period you take into account, the slower it is too respond.

What Time Period Do I Use?
Good question. There are pro's and con's to using both short and long time periods. The easy answer is to use different periods in combination. Maybe a 5MA and 20Ma, it isn't uncommon for traders to use 3 MAs.

A good combination of 3 MAs give you a 'fast, medium & slow' trend line to watch. A popular combination might be a 4MA, 9Ma and 18MA.

Using 2 MAs the trader would look for an occasion when the short MA crosses the longer MA (the faster line crosses the slower line) and runs above the slower MA on the graph. This would be a buying opportunity.

The opposite would be identifying a time to get out. The shorter MA crosses below the longer MA.

If you are new to trading forex with indicators, work with Moving Averages. The most simple and versitile of indicators - they will help you reduce the 'noise' on a price chart and spot trends you can trade on.

Pick up this handy course HERE digest the information and set up your demo account to get going! It even helps you with your software!