Moving Average Trading Strategy | Technical Analysis

In this video, I will be sharing the best ways of using moving averages for the purpose of trading.

First up, let us understand, what is a moving average?

A moving average is a simple line that shows the average price of an asset over a particular period of time. This means that a 20 period moving average will show us the average price of the last 20 candles.

But, how can a moving average help us in trading? How to we interpret the moving average?

Well, a moving average is basically used to identify the trend of the market and simplify the price action of the asset.

So, if the price is trading above the moving average and the moving average is sloped upwards, we can consider the price to be in an uptrend.

Inversely, if the price is trading below the moving average and the moving average is sloped downwards we regard this as a downtrend.

A flat moving average with the price moving around it, is regarded as a sideways market.

Different moving averages will show different trends of the market.

For instance, a 200 period moving average will show us the long term trend of the market.

A 50 period moving average will show us the medium term trend of the market.

And a 20 period moving average will show us the short term trend of the market.
Now, a lot of traders like to use 2 or more moving averages to identify the trend of different terms.

For instance, here on this chart we have 3 moving averages. The 20, 50, and a 200 period moving average.

Here we see that the 20 and 50 EMA are sloped upwards and the price is above them. Hence we can say that the price is in a short term uptrend. But the price is below the 200 period EMA and the 200 EMA is sloped downwards. Hence, we can say that the long term trend is downwards. So the price is in a short term uptrend and a long term downtrend.

A lot of traders also use moving average crossovers for trade signals. For instance, if we use a 20 and 50 EMA example. A sell signal is generated when the 20 EMA crosses below the 50 EMA.

On the other hand, a buy signal is generated when the 20 EMA crosses above the 50 EMA.

The crossovers can sometimes provide good trading signals in a trending market. But, in ranging markets, crossovers can give us a lot of false signals.

Another major characteristic of the moving average is that it acts as a dynamic area of support and resistance.

This means that whenever the price is in an uptrend, the price will often find support at the moving average.

Similarly, in a downtrend, the price will often find resistance at the moving average.

We will use this particular characteristic and create 3 strategies around this concept.

We will only use the 200 period Exponential moving average for all of these strategies.

And the timeframe will be 15 minute timeframe.

Видео Moving Average Trading Strategy | Technical Analysis канала Trade Prime