How to use moving averages in your forex trading strategy
If you’re new to forex trading, then it makes sense to look into a wide variety of different strategies and tips to help you on your way. You’ve likely heard of uptrends and downtrends before – but what exactly are they? And how can you look into and use moving averages to help bolster your forex strategy in general?
There are plenty of things you need to consider and balance when you first get started with forex. For one thing, it is well worth visiting ForexFraud to learn more about blacklisted forex brokers. There are, unfortunately, unscrupulous brokers out there that are less than legitimate, and ForexFraud is a great resource to use.
Here are a few things to keep in mind when it comes to moving averages and forex trading.
Considering the simple moving average
One of the first things you should consider when looking into moving averages and forex trading is, of course, the simple moving average (SMA).
A moving average is the in-between spot that falls halfway between the uptrend and the downtrend. All you normally need to do is plot the middle points across a day of trading.
The SMA is really easy to calculate. You simply add up, say, six average points across six hours of trading. You then need to divide the total by six. This will give you a total figure for the amount of time you wish to analyse.
The calculation is, therefore, going to help you manage the way that forex is likely to run over the hours and days to come. However, it’s not going to be a foolproof plan of action.
Learning to balance the moving average
Regardless of how you manage your money, a really good point to remember is that forex is unpredictable. The same will apply to different forms of market analysis.
The best thing about using moving averages in forex trading lies in the fact that while it is not a foolproof way to be able to predict the future, it can clearly show you which pairs are showing strength, and which aren’t.
Therefore, while you might not know exactly where the markets are going to go in the future, you can still manage your present portfolio. It’s not always easy to know which pairs are going to be the best when it comes to ongoing trading, and therefore many people use moving averages to try to get a firmer grip.
Be careful
Of course, it makes sense to be extremely careful when it comes to moving averages. Unfortunately, these figures are not always completely cast-iron, and they can shift up and down as spikes occur. Therefore, you have to take them with a pinch of salt – otherwise, you’re stuck with average figures that really aren’t much help at all.
The best thing to do when starting out in forex is, of course, to study the market, research strategies, and trust your gut.