Analysis of Moving Average Indicator

Trend Identification

The moving average indicator can be used as an indicator for generating signals. A buy or sell signal is generated when price either moves above or below moving average, respectively.

If the MA is heading upward in diagonal manner then general market trend is upwards.

If the on the other hand the MA is heading downwards in diagonal manner then general market trend is down-wards.

Upwards Trend/Bullish Trend

If the MA is moving up, then the trend is up-ward & the signal generated is a buy/bullish trading signal.

As long as the price is above the moving average then the trend will remain as an upwards trend. The moving average will act as a 'support level' & price action of the chart candlesticks should not close below the MA.

Buy Signal

When the price moves above the MA and closes above the moving average, a buy signal is generated.

Traders, who want to confirm the trade signal before implementing it, should wait until the MA line turns and starts to move in an upward trend direction. It is always best to wait for confirmation trading signal so as to minimize chances of a whipsaw.

Up-wards Trend - How to Day Trade Forex: A Detailed Guide to Day Trade Strategies

Downwards Trend/Bearish Market

If the MA is moving down, then the trend is downwards and the signal generated is a sell/short trading signal.

As long as the price is below the MA then the trend will remain as a downward bearish trend. The MA will act as a "resistance level" and price action of candlesticks should not close above the MA.

Sell Signal

When the price moves below the MA and closes below the moving average, a sell signal is generated.

traders who want to confirm the signal should wait until the MA line turns and starts to move in a downward direction. This will reduce the chance of trading a whipsaw.

Downwards Trend - How to Day Trade Forex: A Detailed Guide to Day Trade Strategies

Forex Range Market signals

Range Market signals can also be identified using the Moving Average Indicator.

MA Crossover Strategy Strategy

The moving average crossover method is also another signal generation strategy that is more favored by traders compared to the above forex trading signal generation strategy method. Moving average crossover trading strategy is also the simplest form of a trading system widely used by online traders. This MA crossover method is combined with other indicators to form more complex systems & strategies.