As we have said, in Forex trading there are a number of different techniques and indicators that can be used to predict market trends. One of the most important is moving averages.
Moving averages are used to emphasize the direction of a trend. A moving average indicates the average price at two given points in time, over a defined period of time intervals. So when the price falls below its moving average, it’s a signal to sell, and when it rises above its moving average, it’s a signal to buy. There are several kinds of moving average, including simple, weighted and exponential. The exponential moving average is the most often chosen as it takes into account both the most recent data, and the entire time period.
Moving average convergence/divergence (MACD) - a more sophisticated way of using exponential moving averages to detect price swings. This technique plots the difference between a 26-day and a 12-day exponential moving average. It takes a 9-day moving average as a trigger line, so that below this would be a “sell” signal and above this would be a “buy” signal. The MACD is often used in conjunction with other indicators such as the Relative Strength Index or RSI. (More about the RSI in the next post).
Moving averages are used to emphasize the direction of a trend. A moving average indicates the average price at two given points in time, over a defined period of time intervals. So when the price falls below its moving average, it’s a signal to sell, and when it rises above its moving average, it’s a signal to buy. There are several kinds of moving average, including simple, weighted and exponential. The exponential moving average is the most often chosen as it takes into account both the most recent data, and the entire time period.
Moving average convergence/divergence (MACD) - a more sophisticated way of using exponential moving averages to detect price swings. This technique plots the difference between a 26-day and a 12-day exponential moving average. It takes a 9-day moving average as a trigger line, so that below this would be a “sell” signal and above this would be a “buy” signal. The MACD is often used in conjunction with other indicators such as the Relative Strength Index or RSI. (More about the RSI in the next post).
This is just a very brief summary - if you register with Easy-Forex you'll learn in detail about these techniques and many more - and learn how to use them to increase your profits. And of course you can learn more about Forex trading in general at http://www.bizwrite.co.uk/Forex/forexindex.html
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