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Technical Analysis Moving Average

Moving averages (MA) are used to identify trends in forex trading charts as well as other markets. In fact they are the top technical analysis tools use in trend-following trading styles. I use moving averages extensively in my forex trading system. Below is an example of moving averages on my trading chart. This chart is 8 hours time frame chart. To see this example in a bigger and clearer picture, click on the chart.

I am getting ahead of myself here. Let me first take a moment an explain the different kinds of moving averages. The detail explanation and how to calculate them is not necessary. All brokers that I have ever used have at least the moving average added automatically to the chart. So you don't need to worry about the calculation. Just focus on how to use them effectively.

Moving Averages Types

Simple Moving Average

Exponential Moving Average

Weighted Moving Average

I believe there are many others. Don't get yourself confused on how each one differs from the other, just chose one and use it. I like the triangular because it is smoother than the others, that is it. As you start trading you will soon realize you prefer one rather than the other. Most people use the Exponential Moving Average. That does not mean that the EMA is more reliable. As you know most people fail at trading. Your trading mindset is more important than your trading system. So guard your mind.

There in lies your success or your failure in forex trading.

200 Day Moving Average Graph

There are about 5 top moving averages that are commonly in use by forex traders and market traders alike. The 10 bar moving average, 20 bar moving average, the 50 bar moving average, the 100 bar moving average and the 200 bar moving average. I use bar because it could be a daily or hourly or minute chart. It could be 200 day, 200 hours or 200 minute moving average. Below is 200 day moving average graph for the 4 different versions of moving averages mentioned on the page. Click on the chart to see them clearly. You decide which of the versions best serve the purpose of your trading.

Best Moving Averages For Trading

Is there anything likebest moving averages? . The answer is no. While some people focus on the generally agreed dominant moving averages as mentioned above, the 10, 20, 50, 100, and 200, there is nothing like the best moving averages. All I have done with my system is test various combinations and use the ones that have made me money. That is what I am sharing with you today.

These are my best Moving Averages For Trading

I use the triangular moving averages (TMA) on my trading charts. I use TMA 5, TMA 21 and TMA 34. How did I come up with these numbers? The answer is no. These numbers are from the Fibonacci sequence. Leonardo Fibonacci, an Italian mathematician discovered the Fibonnaci numbers commonly known today in the trading world as Fibonacci sequence. You can read on the net more about Leonardo if you are interested in his history. However, if you interested on learning how I use these numbers then read on. The Fibonnaci sequence is formed like this. After two starting numbers, each number there after is the sum of the two numbers before it. So the sequence goes to infinity. Here are the first series in the sequence. 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987....to infinity.

I tested a series of these numbers and decided to settle for 5, 13,21 and 34. You can just follow me along and learn how I use them. Keep your trading simple and your charts clean and you should be OK. Below is a chart with the plotted values. Click on the chart to see a clearer and bigger picture.

Moving Averages Conclusion

You have learn the different types of moving averages and the most commonly used averages by traders. Like I said, knowing the difference, does not really matter, because there is not a shred of evidence that one is more accurate than the other. I decided on using triangular moving averages on all my trading charts. I like the way they appear on my charts. In my trading system, I will explain the purpose of TMA 5, TMA 21 and TMA 34. Sometimes I add 200 day moving average. On my short term chart 15 minute, I use TMA 5,TMA 13, TMA 21. All these will be put together clearly for you to see in my trading system. You will see how I combine the Moving Averages, with Pivot Points and MACD. If you have not yet visited the pivot point page you can do so by going to Pivot Point Trading

You can also continue your forex trading tutorial with a lesson on MACD Indicator. If you came directly to this page from search engine, I will advice you to start from the the beginning of my Forex Trading Tutorial. You will gain much more by starting from the beginning.