How to Choose & Select a Moving Average(MA) to Trade with - Leading Forex Indicators

Choose a Moving Average to Trade with Forex Strategies - Moving Average Technical Indicator

Before a trader chooses a moving average to trade with they will have to figure out what type of trader they are and what chart time frame they use for trading forex. Depending on what type of trader they are, the trader will then determine which moving average period is best to use for their trading method.

A trader can choose a moving average(MA) based on the chart time frame that he is trading: the FX trader might choose to use this Moving Average on the minute trading charts, hourly charts, day charts or even week charts.

The forex trader can also choose to average the closing price, opening price or median price.

Moving average forex indicator is a oftenly used indicator to measure strength of trends. The data is precise and its output which is a moving line can be customized to suit a forex trader's preferences.

Using the moving average is one of the basic ways to generate forex buy & sell signals which are used to trade in the direction of the price trend, since the MA technical indicator is a lagging indicator and a trend following indicator - this means it tends to give late forex entry signals as opposed to leading forex indicators. However, as a lagging forex indicator it generates more accurate forex trading signals & is less prone to whipsaw signals compared and analyzed to leading forex indicators.

Forex Traders select and choose the moving average period to use based on the type of trading they do: short-term trading, medium-term trading & long-term trading.

Short-term trading: 10 - 50 MA Period
Medium-term trading: 50 - 100 MA Period
Long-term trading: 100 - 200 MA Period

The forex price period in this case can be measured in minute charts, hourly charts, day charts or even week charts. For our example we will use 1H chart time frame period.

Short-term moving averages are sensitive to price action and can spot trends signals faster than the long-term moving averages. Shorter term moving averages are also more prone to whipsaw signals compared and analyzed to long term moving averages and a forex trader should choose a price period that will generate a trading signal early but not give too many forex trading whipsaws.

Long-term MAs moving averages help avoid forex whipsaws, but are slower in spotting new trends and trend reversals.

Because long-term moving averages calculate the price average using more forex price data, it doesn't reverse as fast as a short term moving average & it is slow to catch the changes in the trend. However, the longer term moving average is better when the trend stays in force for a longer time but may also give late forex signals.

The work of one is to find a moving average MA period that will spot trends as early as possible while the same time avoiding fake-out signals (forex trading whipsaws).

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How to Choose & Select a Moving Average(MA) to Trade with - Leading Forex Indicators

Choose a Moving Average to Trade with Forex Strategies - Moving Average Technical Indicator