When doing FX, do people use some kind of indicator as an answer? There may be many. One of the most famous indicators is the moving average line. The moving average line is a very major indicator, so some people use it, but in reality, there are many people who do not use it.
What is a moving average line?
A moving average is the average of prices over a period of time. The moving average line is a tool that can read the market price, such as an upward trend if it is upward and a downward trend if it is downward, so it tends to be used by beginners. The most basic moving average line is called a simple moving average line that simply shows the average price of a certain period of time and connects it. . A simple moving average line is obtained by connecting the average value of closing prices over a period of time. Below is a sample. The blue line is the moving average line, which tells us whether the market is trending upwards or downwards.
You can also set a period for moving averages. It is possible to set short-term, medium-term, and long-term periods, which can also be set on MT4 and MT5.
- Short-term moving average line: 5 days, 10 days, 14 days, 15 days, 20 days, 21 days
- Medium-term moving average line: 50 days, 60 days, 75 days
- Long-term moving average line: 100 days, 200 days
By the way, the maximum of 200 days is one year worth of business days for exchanges, so many people set it because they can see whether the trend is up or down from a long-term perspective. Forex is closed on Saturdays and Sundays, so a year is not 365 days. By the way, there are three types of moving average lines in all, so let’s use them according to the purpose.
Simple Moving Average (SMA)
It’s called SMA, and it’s a simple average of exchange rates.
Weighted Moving Average (WMA)
Calculates the average value by weighting the most recent rate. It is characterized by higher sensitivity than the simple average. It allows analysis that focuses on the most recent price rather than simple moving averages.
Exponential Moving Average (EMA)
Calculated by doubling the most recent price. For the 5-day EMA, double the prices on the 5th day, sum them, and divide by 5. It is more sensitive to sudden market changes than the WMA.
Why we don’t need moving averages
Although moving averages are useful tools, many traders claim that they are not necessary. There are the following reasons for this. Of course, there is no right answer as to whether this indicator is necessary or not, so ultimately it will depend on personal preference. Some people say that if they have the same knowledge and understanding when actually looking at it, they don’t need this information. Technical analysis is important, but now it’s better to really play with your own style. Thinking about how to win is simpler than you think. It’s OK to use moving averages as a way to significantly increase your winning rate.
I can’t see the chart
Some people become indicator geeks and end up putting a lot of indicators on their charts as a job. In this case, I don’t recommend it. Because it makes the charts too hard to see, there are many cases where you get confused and don’t know where to enter. If you look at a lot of candlesticks in the market, indicators become annoying. If you are a professional trader, you will make simple predictions and these categories will get in the way. It is not essential as a way of thinking if you are in a situation where you can win as a result.
auxiliary tools
The moving average line is only a training wheel in the first place. Before that, it is necessary to know the direction of the market as a premise. If you don’t even know the direction of the market, you will lose no matter what training wheels you use. First of all, it is essential to check the market price on a daily or weekly basis before using the indicator.
lots of fakes
It is said that using an indicator often matches the trick. It is said to buy when the moving average line becomes a golden cross and sell when the dead cross is reached, but there is no 100% investment. There are many cases where the use of indicators is rather tempting and loses. That’s why many people don’t use it.
prone to confusion
There are many types of moving averages, but using them makes almost every situation look like an opportunity. This can make you hesitate about whether to enter or not, which can often lead to confusion. Even if you use it because you want to see it, adding it does not necessarily make it easier to see. There is no answer, so if you are a little unsure, you can choose not to use something like this this time.
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