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Moving Average Forex Strategies

About the Moving Average Forex Strategy

Moving average is one of the most widely used Indicator because it is simple and easy to use.

 

This Indicator is a trend following indicator that is used by Forex traders for three things:

  • Identify the beginning of a new trend
  • Measure the sustainability of the new trend
  • Identify the end of a trend and signal a reversal

 

The MA is used to smooth out the volatility of price action. The MA is an overlay indicator and it is placed on top or superimposed on the price chart.

 

On the example below the blue line represents a 15 period MA, which acts to smooth out the volatility of the price action.

Moving Average Strategy Forex Trading

Moving Average

 

Calculation of the Moving Average

The MA is calculated as an average of price using the most recent price data.

 

If the MA uses the 10 period to calculate the average then it is referred to as a 10 period moving average, because most traders use the day as the standard price period we shall just refer to it as the 10 day MA.

 

To calculate the ten day MA the price of the last 10 days is averaged, the average is then updated constantly after every new price period. So after every new price period is formed the average is then calculated afresh using the most recent 10 price periods, that is why it is called a moving average because the average is constantly moving when price data is updated.

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