Analysis of Moving Average Indicator

Trend Identification

The MA can be used as an technical indicator for generating signals. A buy or sell signal is derived/generated when price either moves above or below MA, 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.

Upward Trend/Bullish Trend

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

As long as the price is above the moving average then the market trend will remain as an upward trend. The Moving Average will act as a 'support level' and price action of chart candles shouldn't close below the MA.

Buy Signal

When the price crosses above MA and closes above the moving average, a buy signal gets generated.

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

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Up-wards Trend - How Do I Day Trade Forex: A Detailed Tutorial to Day Strategies

Downward Trend/Bearish Market

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

As long as price is below the MA then the trend will remain as a downwards bearish trend. The MA will act as a "resistance level" and price action of candlesticks shouldn't close above the MA.

Sell Trade Signal

When the price goes below the MA and closes below the MA moving average, a sell signal gets generated.

Those that want to confirm the signal should wait until the MA line turns and begins to move in a downwards direction. This will minimize the chance of trading a fake out.

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Downward Trend - How Do I Day Trade Forex: A Detailed Tutorial to Day Strategies

Forex Range Market signals

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

MA Crossover System Strategy

The moving average crossover trading method is also another signal generation trading strategy that is more favored by traders in-comparison to the above forex signal generation strategy method. MA crossover strategy is also the simplest form of a trading system widely used by online traders. This MA crossover technique is combined together with other technical indicators to form more complicated systems & strategies.

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