WHAT ARE MOVING AVERAGES?

Moving average indicates a way to smooth out price action over time. By “moving average”, we mean that you are taking the average closing price of a currency pair for the last ‘X’ number of periods. On a chart, it would look like bellow this:

A moving average indicator is used to help us forecast future prices as every indicator does. It is better to determine the potential direction of market prices by looking at the slope of the moving average.

As we said, moving averages smooth out price action.

There are different types of moving averages and each of them has their own level of “smoothness”.

Actually, the smoother the moving average, the slower it is to react to the price movement.

The choppier the moving average, the quicker it is to react to the price movement. To make a moving average smoother, you should get the average closing prices over a longer time period.

Now, you’re probably thinking, “C’mon, let’s get to the good stuff. How can I use this to trade?”

In this lesson, we first explain the two major types of moving averages:

1. Simple moving average
2. Exponential moving average

We’ll also let you know how to calculate them and give the pros and cons of each. Just like in every other lesson in the forexmic.com, School of Pipsology, you have to learn the basics first!

Then once you  have got that on lockdown like Argentinean soccer player Lionel Messi’s ball-handling skills, we’ll teach you the different ways, tools and techniques to use moving averages and how to incorporate them into your trading strategy.

By the end of this lesson, you’ll be just as smooth as Messi is!

Are you ready?

If you are, give us a “Heck yeah!”

If not, go back and repeat from the introduction.