It is not for nothing that the sliding tool is considered an important tool. This is because it will allow, having secured its data, to receive a number of significant advantages during work and draw the right conclusion about the auction. Of course, this is where the indicator is more than a useful tool.
One of its types is WMA(Weighted Moving Average) is a weighted moving average, which is a simple modification of the moving average, which is capable of determining trends and will help the player if he needs to filter out false signals and find among them suitable ones for investment. In its calculation, much attention is paid to late price indicators. It is worth remembering that this is also an example of a trend indicator that can accurately determine the direction of the current trend, which is why it is also interesting for investors, including beginners. The most important thing here is to configure it correctly for a specific trading style and type of instrument.
Its data is used by successful traders who care about the quality and reliability of the tools they use. Note that it can also be considered weighted to some extent, because weight gain persists over time. WMA, however, is more flexible in settings; in comparison, a simple sliding one is a rather “clumsy instrument”, inferior in many respects to a weighted one.
Here you can get the simplest signals, even just by studying the trend of the asset dynamics: if the instrument is pointing downwards, we are talking about a downward sentiment, if, on the contrary, it is up, we are talking about an upward trend. This tool allows the player to get rid of one drawback of sliding ones, because... they often pay attention to cost indicators without attention to their distance from a specific cost. Weighted moving average is an optimized system model that distributes weight between prices and pays more attention to their latest indicators. As a conclusion, it is worth noting that WMA is an excellent tool and a reliable source of data that is easy to use and will easily become the basis for creating new ones.
Log into your broker's terminal, add the WMA indicator to your chart and see what comes up
| Broker | Min. deposit | Payments | Open an account |
|---|---|---|---|
Founded: 2016 | |||
Founded: 2012 | |||
Founded: 2014 |
Calculation formula
This tool, as we have already said, assigns greater weight to the latest data, and less weight to earlier indicators. It has the following form of calculation: all closing prices are multiplied by some weighting factor:
LWMA = SUM (CLOSE (i) * i, N)/SUM (i, N), where:
SUM - sum;
CLOSE(i) - closing price;
SUM (i, N) - sum of weight coefficients;
N - period.
Such information will be more effective for the trader than data obtained through the standard type of moving average, because Here, significant attention is paid to the latest cost indicators. That is why the tool is more detailed in displaying the current state of affairs.
Advantages of the indicator
WMA has its “fans”, investors who actively use its data. This is because the weighted moving average has a number of advantages that set it apart from other instruments. WMA is able to instantly react to market dynamics, which is more attractive than a slow smoothed moving average. It will simultaneously show the player both the trend and price fluctuations, and will make the work more effective.
In the event that a sharp change in trend or price jumps is expected in the market, he will be the first source of such information. However, despite the fact that it quickly reacts to trend changes, it is still difficult to accurately determine the trend. By smoothing graphs and displaying data in the form of average values, you can get rid of unnecessary information, including false information. This tool is good for quick trading lasting a day/several days. The principles of its operation are the same as those of other trending instruments. It is a separate serious tool that can be used even with minimal experience in trading on the market.
Thus, this tool is more accurate and detailed in displaying current data. Like other indicators, it lags, but, unlike other similar tools, it is almost the fastest and is worth using in your work. No wonder it is so popular, is part of complex trading techniques and where its data is used either as a filter or main source information.
Thanks to mathematical averaging of data, working with the indicator is profitable, which attracts the attention of players to it. This tool will allow you to find out not only information about trends, but also about their turning points. Using several of its lines at once (especially if you use round settings: 100, 200, 300), you can easily get a more powerful tool with advanced capabilities, enter trades with a minimum of losses and risks, which is also valuable for a trader.
How to add WMA to the MetaTrader 4 terminal?
As traders know, MT4 contains a number of standard tools for work, which, after installation, are immediately available to players to analyze the dynamics of assets. The WMA we are discussing in this material is also immediately available here for work and you can easily add it to the chart. Having opened the program, you need to go to the trend instruments department by following the following path Indicators - Trend:
Then you need to select among the Moving Average tools. By clicking on its name, you need to go to the settings to select a specific type of MA - WMA:
After making all the settings and clicking the "OK" button, you can add the tool to the main workspace and work with it. In this case, the graph takes the following form:
How to add WMA to the MetaTrader 5 terminal?
The process of adding an indicator to the MT5 program looks exactly the same, retaining all the functionality of the previous solution, including the list of basic instruments, which has increased here. To add WMA to the chart, here again you need to follow the path: Indicators - Trend:
By clicking on the MA name, you need to go to its settings and select its specific type:
Once all the sliding parameters are specified and it is ready for use, you can click the “OK” button. The instrument is immediately added to the chart, which takes the following form:
How to add WMA to the broker terminal?
Among the platform tools brokerage company() on this moment you can work with 4 indicators, MA is also presented here, and only as SMA and it is not possible to choose another type of instrument, which, of course, limits the trader’s capabilities here:
This brokerage company has many different tools for work in the terminal offered to the client, including WMA. In order to add it to the trading chart, you need to click on the “Indicators” button, conveniently located immediately in the main workspace of the program. A list of indicators available here will open, in which you can find the desired instrument and, by clicking on it, add it to the chart and make its settings:
The settings panel is located to the left of the main workspace and after changes, the tool immediately shows the update on the chart:
Having completed all the settings and minimized this panel, you can immediately proceed to the main work:
This brokerage organization () terminal also contains many tools for work, including different types moving average: SMA, EMA and the WMA we are considering. In order to add it to the chart for work, you need to click on the “Indicators” button located at the very bottom of the platform on the left:
When you click on this button, a menu of all tools will open, among which you can find a sliding one and immediately select its type - WMA:
Having completed all the necessary settings here, you can add it to the workspace. To do this, use the “Build” button:
The indicator has been added to the chart. You can get started:
How to install an indicator in the terminal?
Traders tend to place high demands on the operation of brokerage platforms, and this is easy to explain - if such a program contains maximum functionality, is easy to learn, if it works without failures or freezes, then, of course, it is interesting to them. One of the options that is attractive to them is the ability to add indicators to the platform. It will allow the player to implement any trading methods and systems, improve his performance and simply get a few more sources for searching for signals. Still, this is not such a common option in terminals. They usually also have an MA tool. In the event that it is not available on any platform, you can install it if such an option is available. Thus, in the MT4 platform you can independently install various tools, robots and advisors.
In order to add MA to this trading solution, you need to find its files on the Internet; you can download them for free from our website here. Now you can continue working. You need to enter the data directory located at the top left and click the “Open data directory” button:
Now, in the folder that opens, you need to find the “MQL4” folder, then “Indicators”:
It contains the tools that were previously installed in the program:
You just need to copy the indicator files here. That's it, the tool is already in the terminal, you need to restart the program (that is, shut down and open it again), see if it is installed in the custom indicators folder.
WMA Trading Signals
WMA price crossing:
- If the value line, having broken through the moving line, rushes upward from below, this is a good buying opportunity.
- If, after breaking through the moving average, it moves from top to bottom, this is a selling opportunity.
Intersection of two WMAs:
Its two lines allow the trader to get a more complete picture and draw clear conclusions, guided by the following logic:
- When the “fast” moving average (red, 100) crosses upward from the “slow” moving average (blue, 200), this is a great buying opportunity.
- If the lines move from top to bottom when they cross, this is a selling opportunity.
Signals of support/resistance levels:
WMA is a powerful tool that can be used as resistance/support levels, for example, with settings of 100, 200 and 300. This will generate simple, but profitable data on the status of the asset:
A signal to enter here may be that each subsequent decline and peak should be higher than the previous ones. In the opposite situation, you can sell. Here it is worth paying attention to the fastest line, which, heading down, can cross two other moving averages.
WMA signals in MetaTrader 4
- Price crossing the WMA line
- Intersection of two WMAs
Purchasing CALL contracts:
Acquisition of IUT contracts:
- Signals of support/resistance levels
Let's add 3 WMAs to the chart with the following settings: WMA 100 (blue), WMA 200 (red) and WMA 300 (yellow). Here, the entry signal may be that each subsequent decline and peak should be higher than the previous ones:
Purchasing CALL contracts:
Acquisition of IUT contracts:
WMA signals in MetaTrader 5
- Price crossing the WMA line
Purchasing a contract UP:
Purchasing a DOWN contract:
- Intersection of two WMAs
Opening a contract UP:
Opening a contract DOWN:
- Signals of support and resistance levels
WMA signals from Olymp Trade
- Price crossing the WMA line
Purchasing a contract UP:
Purchasing a DOWN contract:
- Intersection of two WMAs
Opening a contract UP:
Opening a contract DOWN:
Moving average indicator- one of the most common, which shows the average price value for a specific period of time. If the price chart is lower, it is a downward trend, if higher, it is an upward trend. Moving averages appeared on the market a long time ago and were able to successfully gain popularity among traders around the world and are present in most trading. main reason such popularity - in easy to use, the ability to qualitatively predict asset prices.
The mechanism of operation of the indicator is simple and will be clear even to a beginner in options. This is an automated program that calculates the average price of an asset for a specific time period, and also shows deviations of the value from the average value. The indicator determines short-term and global changes in market trends, which will allow you to enter into transactions based on correct forecasts and make a profit.
There are 4 types of moving averages:
- Simple Moving Average (SMA) - simple moving average.
- Exponential Moving Average (EMA) - exponential moving average.
- Smoothed Moving Average (SMA) - smoothed moving average.
- Linear Weighted Moving Average (LWMA/WMA) - linearly weighted moving average.
Let's look at each of them separately.
Simple moving average
Moving average or Moving Average (MA, SMA) is a standard indicator whose main purpose is to measure the average price over a time period. This moving average is the most popular among traders who trade on higher time frames. The indicator shows average price, but the peculiarity of SMA is that when calculating it, equal importance is given to all prices.
SMA is used to smooth out minute price fluctuations and identify overall market dynamics. More often, this trend analyzer is used with other oscillators to eliminate false signals.
You can read more about opportunities and trading using MA in detailed review.
In the image below you can see the behavior of the MA indicator (periods 20 (red line) and 80 (blue line) on the price chart on the MetaTrader 4 platform:
Exponential moving average
SMA has a drawback, signal delay, so EMA appeared, which reduces this delay. This happens by giving the new price more weight compared to the old ones. EMA, first of all, looks at the closing price for a given time. Moreover, the shorter the time interval, the greater the “weight” the new price will have. EMA is more sensitive, more receptive to market dynamics, and quickly reacts to price changes, which is why it is common among those traders who trade intraday. It is similar in many ways to a weighted moving average.
Using an exponential curve will avoid false signals, accurately assess the situation of market changes due to greater sensitivity.
In the image below you can see the EMA indicator (periods 20 (dark red line) and 80 (light pink line) on the price chart on the MetaTrader 4 platform:
Smoothed moving average
The Smoothed Moving Average (SMA) is a very interesting indicator that focuses on Special attention large time period. Here the fluctuations of the line are small, which is why it is called smoothed. Such a line does not provide clear data, but it is less sensitive to market fluctuations and gives fewer false signals. For the line to change, there must be a significant fluctuation in the market. And yet, few traders use this moving average due to the specifics of its construction.
It is worth using a smoothed moving average when long-term trading, because it works well over long periods of time. In the image below you can see the SMMA indicator (periods 20 (dark blue) and 80 (light blue) on the price chart on the MetaTrader 4 platform:
Weighted moving average
This moving average also places greater weight on new information over old data, but does so in a simpler and more pronounced way. Weighted moving averages show the average price for a specific time interval, each period is multiplied by a weighting factor. As a result, earlier values have less weight, and new values have more weight, which affects the sensitivity of the indicator to latest changes prices. It is important to monitor its performance, because... it gives a lot of false signals.
This indicator will help eliminate the significant disadvantage of simple moving averages, which pay attention to prices regardless of the distance from the production cost. A weighted moving average pays more attention to prices that are closer to the current option price. It’s simple to work with: when the curve is directed downward, this is a signal to buy a PUT option, if it is upward, it is a signal to buy a CALL option.
In the image below you can see the behavior of the WMA indicator (periods 20 (pink) and 80 (light pink) on the price chart on the MetaTrader 4 platform:
note: MA and exponential moving average are especially popular in trading today; if the first moving average is more “lazy”, then the second one is the most dynamic. And yet, what exactly to use in trading is decided by each market participant individually and based on his own strategy. For short periods it is better to use exponential average, for long periods it is better to use simple MA. Remember that all moving averages have undeniable advantages; it is not for nothing that they are included in a large number of effective strategies.
The MA indicator is a classic tool that is found in most modern trading terminals. It is also installed on the MetaTrader 4 platform. If you do not have MetaTrader 4, you can download it.
To add to the main price chart in the MetaTrader 4 platform, you need to do next steps:
1. Click the “Insert” tab in the top menu of the platform
2. Select the “Indicators” tab
3. In the drop-down menu that opens, select the “Trending” tab
4. In the drop-down menu that opens, select Moving Average
5. In the active window that opens, leave the Period parameter in the standard position: 14. Next, you can change the period value in any direction and analyze the received data. Also in the MT4 terminal (section “MA Method”) you can add several types of averages to the main chart: exponential, smoothed, weighted.
6. The schedule has been created, you can work with the information:
If your platform doesn't have Moving Average, you can download it. You can view instructions for installing indicators in MetaTrader 4.
For productive trading with the Moving Averages indicator, we recommend choosing. Working here is simple and comfortable, you have a choice of oscillators (including the Simple Moving Average), convenient Personal Area. You can see what the terminal workspace looks like by going to the website:
Also, to effectively predict market signals, we recommend working with the popular MetaTrader 4 terminal, where you can set any Moving Averages to the main price chart.
Take advantage of the capabilities of the MetaTrader 4 platform and, based on information from Moving Averages, as well as other indicators, place bets in the Finmax terminal. Below in the image you can see upward trend on the MetaTrader 4 platform:
To buy an express option CALL
2. Type of asset
3. Expiration
4. Bet size
5. Quote movement forecast: UP
Below in the image you can see downward trend on the MetaTrader 4 platform:
To buy an express option PUT in the Finmax trading terminal, you need to do the following:
1.Go to the broker’s website and prepare an option, indicating:
2. Type of asset
3. Expiration
4. Bet size
5. Quote movement forecast: DOWN
6. Click the “buy” button and monitor the results.
IN general case weighted moving average (English Weighted Moving Average, WMA) is any average that assigns different weights to observed values of a random variable. The idea behind its calculation is to give more weight to new observations and less weight to older observations. This is a logical approach in technical analysis from the point of view of determining the nature and strength of the trend prevailing in the market. This approach allows not only to smooth out sharp price deviations, but also to more accurately determine the direction of the trend, since the latest data is given greater weight.
Formula
In practice technical analysis The most widely used is the linearly weighted moving average ( English Linear Weighted Moving Average), the calculation formula for which in general is as follows:
The above formula can be written condensed:
where n is the smoothing interval;
P t-i – price value during the time period (t-i).
It should be noted that the denominator is an arithmetic progression and, for ease of calculation, can be transformed as follows:
Thus, the above formula can be represented as follows:
Also quite common in the practice of technical analysis is a special case of a weighted moving average, namely, an exponential moving average ( English Exponential Moving Average, EMA).
Calculation example
Let's consider the methodology for calculating a linearly weighted moving average using the example of data on stock quotes presented in the table.
Let's assume that the smoothing interval is 5. In this case, the first WMA value can be calculated for the 5th period. Substituting the available data into the above formula, we get its value equal to 6.5.
The next WMA value will be 5.7.
Further calculations are carried out similarly, and their results are presented on the graph.
The advantage of this indicator over the simple moving average ( English Simple Moving Average, SMA) is a smaller delay. This is due to the fact that the oldest data have an insignificant weighting factor, and, therefore, the direction of the trend is established mainly according to the latest data. For example, if the smoothing interval is 15, then the share of the last three price values will be 0.4, and the first three 0.06.
(15+14+13)/105 = 0,4 *
(3+2+1)/105 = 0,06
* 105 represents the sum of numbers from 1 to 15
Hello everyone.. Today, as you may have guessed, I will talk about the most interesting trend indicator that is included with absolutely any trading terminal. The importance of the moving average for traders is difficult to overestimate. I must admit, although the indicator is simple, it is very effective in skillful hands.
In this article I will talk about moving averages that are built into MetaTreder 4, but the principle of operation, display, use, and settings are identical everywhere, so you won’t get confused. In any case, I am open to communication and if something is not clear, I am always ready to communicate both in the comments and in personal correspondence.
Description of the Moving average indicator
Particularly popular in technical analysis is the moving average, also known as moving average. The moving average is used by traders all over the world and there are even those who have made a fortune using this indicator alone.
In addition to the moving average in its original form, it is used in the calculation of many other indicators, such as Bollinger Bands, Stochastic, RSI and others.
Moving Average (abbreviated MA)- a stock exchange indicator that reflects the average value of the price indicator of the selected asset for a certain time period.
The sliding one does not have an inventor as such. The thing is that traders have always tried to arrive at an average value, which is what the moving average mechanism is based on. We will talk more about the mechanism of its operation a little later.
Admittedly, moving average smoothing is used in many areas. For example, in economics, smoothing time series using a moving average is used to:
- The smoothing procedure leads to the complete elimination of periodic oscillations in a time series if the length of the interval is taken equal to or a multiple of the cycle, the period of oscillations.
- Moving average smoothing is great for identifying the right price during seasonal fluctuations.
Why Use Moving Average Smoothing
In trading, market analysis based on moving average smoothing helps determine overbought or oversold currency pair, stock, bond, futures or the instrument that you are trading at the moment.
I think everyone knows how to calculate the average. We have two numbers: 3 and 5. Having added the numbers, we get the sum of 8, which must be divided by the number of numbers, that is, by 2. As a result, it turns out that the average between the numbers will be equal to 4. It is this principle, with some changes in the formula, that is applied to calculate the smoothed moving average. Below we will talk about the periods and types of moving averages, where you will learn the specific formulas for each.
Smoothing the price and identifying the average on the chart will look like the figure below.
The screenshot shows the AUDCAD currency pair and a smoothed moving average. As you can see, if the price is far from the moving average, then it is pulled towards the average like a magnet. This is precisely what the logic of working with a moving average is based on, but more on that below.
In addition, analysis of the smoothed moving average greatly helps the trader in identifying the current directional trend in the market and helps to make a forecast at what point the trend will reverse.
Do you agree that it is imperative to understand the smoothed moving average algorithm? Personally, I have no doubt that the indicator is useful.
Pros and cons of using moving averages
It’s not a very usual place for this section, if you read my articles you’ve seen it; usually I post the section with the pros and cons below, but this is a different case.
Making a forecast of price movements using moving averages is very common among many “gurus”. In order not to confuse the reader or viewer with explanations of why the price is moving in one direction or another, it is much easier to place a moving average on the chart, and then everything falls into place. Up means the trend is up, down means down. And yet, the indicator has its pros and cons.
Pros of the Moving Average indicator
- It is easy to determine the direction of the current trend;
- The indicator curve very often acts as support or resistance for the price;
- It is relatively easy to take the maximum points from the existing movement;
- A lot has been developed based on Moving Average trading strategies. You can get acquainted with some strategies in the section of the same name Trading strategies based on moving averages;
- The algorithm of the Moving Average indicator is implemented in many other indicators;
- The use of various settings helps to achieve specific goals for both long-term and short-term investors.
Disadvantages of the Moving Average indicator
- Moving averages lag a lot;
- During a flat, there are too many false signals.
Installing the Moving average (MA) indicator
Due to its extreme popularity, the moving average indicator is included in the standard set of all popular trading terminals. To add an indicator to the chart, select “Insert” -> “Indicators” -> “Trend” and find the Moving average indicator in the list.
At the next stage, you should configure the moving average indicator at your discretion.
Setting up the Moving average (MA) indicator
The moving average is used in a lot of trading strategies and is even the basis of many indicators. His popularity is off the charts. In this part, I’ll tell you about the available settings, but how you will use them is a purely personal matter.
The Moving average indicator settings window includes standard three tabs:
- Options. Includes a list of basic moving average settings.
- Levels. A duplicate moving average curve will be constructed at the specified distance.
- Display. Sets the timeframes on which the indicator should be displayed.
Let's take a closer look at the Settings tab. In this tab, you can have the following moving average values:
- MA period. The number of candles by which the moving average price is calculated.
- MA method. Moving average type (simple, exponential, linearly weighted or smoothed).
- Apply to. Sets the value by which the moving average will be calculated (Close, Open, High, Low). I don't think it's worth messing with these settings. By default, the moving average calculates its value based on the closing price.
- Shift. Very rarely used. This parameter allows you to shift the moving average curve by several points in the selected direction; this will be useful for building channels.
- Styles. You can customize the MA style (color, line type, line thickness).
Moving Average Periods
In the Moving Average indicator, the setting of the period determines exactly how you will trade on Forex. As a beginner, the question was always on my mind: “What period should I use for the moving average?”
In this section I want to point you a little on the right path, but still experiments are welcome. Find and formulate a trade with the value of the desired period, share with others in the comments.
Basic periods for short-term trading with moving averages
The most common periods for short term trading for moving averages are:
- period with a value of 7 - smoothing the moving average price for the week;
- period with a value of 14 - smoothing the moving average price for two weeks;
- period with a value of 28 - smoothing of the moving average price for the month.
Key periods for long-term trading with moving averages
The most common values for periods for long-term trading using moving averages are:
- period with a value of 50 - smoothing of the moving average price over approximately two working months;
- period with a value of 100 - smoothing of the moving average price for approximately six months;
- period with a value of 200 - smoothing of the moving average price for approximately nine months;
- period with a value of 365 - smoothing of the moving average price for one year.
Methods for calculating the moving average
Moving averages are convenient because they smooth out the price movement chart. There are 4 types of MA curve:
- Simple Moving Average (MA);
- Exponential Moving Average (EMA);
- Linear Weighted Moving Average (WMA);
- Smoothed Moving Average (SMMA).
Simple Moving Average (MA)
This is the most common method for calculating a moving average. A simple moving average (SMA) calculates the average of all candles over a specified period n.
The simple moving average calculation looks like this:
SMA = Amount (Closing Price (n)) / n
Simply put, the moving average does not arrange the candles in a hierarchical order and takes into account every single one. Among its disadvantages, we can highlight its susceptibility to price jumps and its tendency to issue false signals.
Exponential Moving Average (EMA)
Exponential Moving Average or EMA method is a type of WMA. They differ in that the decrease in price significance is exponential.
The calculation of the exponential moving average takes the form:
EMA (i) = EMA (i - 1) + (K * [Closing Price (i) - EMA (i - 1)])
- where, i – current price value;
- K = 2/(n+1).
The EMA senses a new trend faster and gives fewer false signals than the SMA, which is why most traders prefer this moving average.
Linear Weighted Moving Average (WMA)
Linear weighted moving average (WMA) is similar to the SMA method. It differs in that it emphasizes the value on nearby candles (the further away the candle, the lower its value). In other words, she arranges the prices of candles according to height, like a coach of students in a physical education lesson.
The calculation of a linear-weighted moving average has the form:
WMA = Amount (Closing Price (n) * W (n)) / Amount (W (n))
Where W is the significance of the candle (the height of students in a physical education lesson), W1 The WMA eliminates some of the shortcomings of the SMA, but it lags at the entry and exit of a trend, and also does not work well in a sideways trend. A smoothed moving average (SMMA) is a moving average in which prices for the average period are more important when current price practically not taken into account. First, the indicator value is calculated similarly to SMA: Sum 1 = S(CL(i), n) SMMA 1 = Sum 1/n After this, the formula for the smoothed moving average is: SMMA (i) = (Amount 1 - SMMA (i - 1) + Closing Price (i)) / X The most commonly used smoothing method is SMA and EMA, and you can forget about WMA and SMMA and not use it at all. For clarity, I will place on the chart all 4 moving averages with the same period: Moving average. Example of use on a chart. Now you know how to install and configure the indicator, all that remains is to figure out how to analyze the current situation and how to work with the Moving Average. The moving average plotted on the chart contains enormous potential. The moving average indicator formula is actively used in such popular indicators as: There are many ways to trade using a moving average, but the main ones are using it as a trend line, as a support/resistance line, and trading at the intersection of two or more moving averages. The easiest way to trade a moving average is to use it as a support or resistance level. Observing the chart, we can notice that the price often bounces off the Moving Average indicator, replacing the support or resistance level. Let's look at the graph: IN in this case a simple moving average is used with a period of 20. We see that when it falls, the price hits the moving average, bounces off it and the price continues to fall down. In this situation, the moving average gives us a signal to continue the downward trend and shows itself as a resistance level. Here's another situation: A simple moving average with a period of 20 is used again. Here the moving average acts as a support level and gives us buy signals. Very often, moving averages are used to determine the trend line and work in its direction. Below I have given two options where you can clearly see how this works. In the first picture, the SMA with a period of 20 acts as a downward trend line. Each time it approaches the moving average, the price receives support from the bears and the fall continues. If the moving average is rising, it is generally accepted that a bullish trend prevails in the market and one should look for buy signals. The figure below shows an SMA with a period of 20 tending upward. With each new approach of the price to the moving average, the bulls become more active, thereby helping the price move higher and higher. As you can see for yourself, the Moving average indicator is perfect for determining the trend. A moving average that is growing upward indicates the predominance of an upward trend, a moving average directed downward indicates the presence of a downward trend, but if it is not possible to determine exactly where the moving average is moving, then we are dealing with a flat. I have already told you how to use the moving average, using it as support/resistance, trend line, etc. Based on logic, the previous methods of application involve trading with the trend. Now let’s consider the option in which we will determine the trend reversal. To determine a trend reversal in Forex using moving averages, you need to install two Moving Average indicators on the chart with different periods. Alexander Elder, the author of the idea discussed here, said that it does not matter which smoothing period to choose, the main thing is that one moving average is twice as large as the second. In this case, the intersection of moving averages may signal a change in trend. Let's agree with Elder and try to use two moving averages: a fast and a slow one, marked in red with a period of 22, and a fast one in blue with a period of 11. The intersection of the moving averages will give a signal of a reversal. When a slow moving average crosses a fast moving average from top to bottom, this may be a signal for a downward trend: When the slow moving average crosses the fast moving average from bottom to top, this is a signal for an uptrend: In my opinion, this method of working with moving averages is very promising. In the article "Trading strategy based on moving averages (Moving Average)", which you can read, I described in great detail how to make a profit by working with two moving averages: a simple moving average with a period of 14 and a simple moving average with a period of 28. Be sure to read and evaluate it yourself what moving averages can do. How do you like the indicator? I tried to talk in great detail about the full functionality of the moving average (ma) and show how to use it in work. The article provides strategies and ideas. It is not safe to use them in trading, but it is very possible to build your own strategy based on them. In addition, on the Internet and on the pages of my website, there are a lot of strategies using moving averages. There are plenty of variations. In addition to two moving averages, you can use 3 lines and as many as 7 moving averages, coloring them in the colors of the rainbow. The moving average can be used both within a trend and to receive preliminary signals about the end of an old trend and the emergence of a new trend. There are often options in which traders use an aggregate signal in combination with a moving average and other indicators. In addition to indicators, it is not without logic to use candlestick patterns and patterns for better trading. I think that the article proposed the idea very well and certainly figured out how to use the moving average (ma) on the chart. Using a moving average is a powerful tool for trading on any market (Forex, CME, stocks, futures, options, etc.). I said at the beginning of the article that many traders made their fortune on this indicator, but to learn to trade at their level you need to spend hundreds of hours of training in the trading terminal. That's all for me. I look forward to your comments with reviews or your suggestions for working with moving services. Until new articles. Moving averages (MA - from the English Moving Average) are widely used in modern technical analysis of price charts of financial instruments. The main purpose of moving averages is to smooth out minor fluctuations and identify the main trends in price movement. Mathematically, the moving average indicator, at each of its points, represents the average value of the previous n number of price values, called the order of the moving average. For example, if each MA point is calculated as the average price value over a period of one day (D 1), then its order is correspondingly equal to one day (D 1). Four types of moving averages on a price chart According to the method of construction, moving averages are of the following main types: A simple moving average (SMA - Simple Moving Average) is constructed as follows: all price values for the selected period are summed up (order of the average) and divided by the number of these values. In other words, the arithmetic average of the price for the period is found. The prices can be opening prices, closing prices, or any others, depending on the preferences of the trader. The disadvantage of a simple moving average is the fact that it gives equal weight to all price values in a selected period n. That is, for example, a short upward trend, which has long since ended, nevertheless continues to influence the latest value of the simple moving average along with more relevant recent price trends. In order to level out the error caused by this fact, weighted and exponential moving averages were created, discussed below. The formula for calculating a simple moving average is as follows: SMA=(P1+P2+…+Pn)/n, Where P 1…Pn – price values in period n; n – Number of price values in period n. Weighted moving average (WMA - Weighted Moving Average) is calculated using the formula: WMA = Sum(Wn*Pn) / Sum(Wn), Where Pn – price value (P 1. P 2,…Pn); Wn – price weight, calculated in such a way that the closer the price is to its current value (to P 1), the greater its weight: Wn = 1/n Thus, recent prices have a greater impact on the value of the weighted moving average than previous ones. Exponential moving average (EMA - Exponential Moving Average) is calculated using the formula: EMA = EMA(k-1) + (2/(n+1))*(Pk – EMA(k-1))
, Where EMA (k -1) – previous value of the exponential moving average; n – Moving average period; Pk – current price. As you can see from the formula, the exponential moving average takes into account its previous value and gives more weight to recent prices (Pk). It is the fact that the latest prices have more weight, and the influence of old prices decreases exponentially, that makes the smoothing better. Some traders believe that the exponential moving average is better at predicting trend reversals and produces fewer false signals. The signals given by all types of MAs are quite simple and are interpreted as follows: – A moving average moving up indicates a bullish mood in the market and gives a signal to buy; – A moving average going down indicates a bearish mood and gives a signal to sell; – When the price crosses the moving average from bottom to top, it indicates an acceleration in price growth and gives a signal to buy; – When the price crosses the moving average from top to bottom, it indicates an acceleration of the price decline and gives a signal to sell; – A reversal of the moving average from bottom to top with a rising price chart is a signal to buy; – A reversal of the moving average from top to bottom when the price chart is falling is a signal to sell. Summarizing the above, it is worth noting that none of the described moving averages is a panacea. All of them give a lot of false signals and require additional filtering. However, the correct choice of the type and period of the moving average indicator, applied to specific market conditions, can significantly simplify the decision-making process for the trader. Moreover, the complex is not always the best, and often a simple moving average is the best choice for analyzing a price chart. The MetaTrader4 (MT4) terminal, the most popular among Russian traders, has a wide range of various kinds of indicators, among which, of course, there was a place for moving averages. In order to attach a moving average to the chart, you need to follow the following route: Insert -> Indicators -> Trend ->MovingAverage. Clicking on the tab MovingAverage you will see the following window in front of you: Let's look at all the parameters in order. Let's start with the parameter "Period", as you probably already guessed, the required period of the moving average is set here. Parameter "Shift", allows you to shift the moving average to the right relative to the price chart (in this case, the shift to the right is set to 30 candles). In the window "MA Method" You can choose one of four types of moving average: The next window allows you to select the price type for which the indicator will be built. You can choose from four main prices: In addition, average prices are offered for selection, such as: Finally in the options group "Style" You can specify the color, type and thickness of the moving average line. After setting the necessary settings, click the “OK” button and enjoy the look of the indicator plotted on the price chart :) Having talked about the theory, let's now move directly to the practice of using this technical analysis indicator. A huge variety of trading systems and strategies are built on the basis of moving averages. All these strategies are probably too numerous to count, and we, in fact, don’t need them. After all, for the most part, they are all based on several basic properties of the indicator in question and differ from each other only in the nuances of settings and (or) different sets of auxiliary indicators. Below, I bring to your attention those basic trading strategies based on moving averages, based on which you can create your own trading systems. They can be used like constructor blocks, embedding them into your trading system and changing settings and an auxiliary set of indicators. I call auxiliary indicators those indicators that are used solely to confirm the signal given by the main indicator (in this case, moving averages). So let's get started. This is the simplest and most obvious application of MA. After all, the very essence of the moving average is precisely to smooth out all the “irregularities” of the price chart as much as possible, eliminate random price fluctuations and ultimately give out its “pure” direction. At the same time, in addition to the direction of the MA, they also look at the relative position of the price chart. If the price chart is above the upward moving average, then this indicates the current superiority of the bulls (and, therefore, a bull market and an uptrend). And if, on the contrary, the price chart is under a falling moving average, then this is a clear sign of the superiority of the bears. In my opinion, the most optimal option for using this strategy would be the following: 1. The main trend is determined (possibly on a chart with a larger time frame than the one set on the chart where trading is carried out). Here we are interested in only two options: As you can see, in this case we no longer get a strategy built on moving averages in its pure form, but a certain system of several (at least two** trading strategies). ** The second strategy is precisely designed to look for entry points in the direction indicated by the MA (by the way, it can also be built on moving averages, but only of a lower order). There is, of course, another option in which traders try to open a position immediately at the moment of the moving average reversal, but, in my opinion, it is not very reliable. I'll explain why. The point here is that it is quite difficult to determine the moment of the MA reversal. It’s one thing to look at the price chart and determine after the fact what excellent moments to enter a position were at MA reversals, and a completely different thing is to determine this very moment of reversal in real time. Due to the fact that the current price is constantly changing, the tip of the MA line is also in constant yaw. It either turns upward, following the rise in price, or pecks down, following its decline. And besides this, nothing prevents the moving average, which has turned around, from suddenly resuming its movement in the previous direction. In this case, we are talking about the intersection of the so-called fast and slow MA lines. Of the two lines, the one whose period is shorter is called fast. And the slow one, accordingly, is the moving average whose calculation period is longer. The point here is that the shorter the period with which the MA is calculated, the more sensitively it reacts to every price change. A longer period, on the contrary, makes the moving average “clumsy” and insensitive to relatively small price changes. It is due to this different “sensitivity” of the indicator to the same price changes that the phenomenon of mutual intersection of moving averages arises. Although, to be more precise, it would be more correct to say that the fast line crosses the slow line. Well, these are all nuances, but how can you use this in trading? This phenomenon is used in the following simple way: Some traders use not two, but more moving averages with different periods. And in order to make a decision to buy or sell, they wait until all these lines line up in a certain order (ascending or descending period, respectively). In this case, the signal to buy or sell is the price crossing the MA line. Moreover, to buy we wait for such an intersection from bottom to top, and to sell - from top to bottom, respectively. When the price crosses its average value, this indicates that the intensity of its change is increasing. And this, in turn, may be evidence of increased interest in financial instrument on the part of market players (including market makers) and result in further price movement in the same direction. This is what this strategy is based on. Sometimes, for additional signal filtering, this strategy uses not one, but two moving averages with different periods. In this case, the price crossing the moving average of a larger period will be a preliminary signal, and the crossing of a moving average of a smaller period will be the final signal. One of the main disadvantages of all the above strategies is the large delay of signals supplied by MA. After all, in essence, the MA is just the average value of all price values on a given time interval. Therefore, before the corresponding signal is given (for example, the intersection of two moving averages), the price sometimes manages to complete most of its movement. This problem can be partly solved by reducing the MA period. After all, the shorter the period, the more sensitive it will react to every price movement. In this case, the price movement can be caught at its very origins, but another problem appears here - a large number of false signals. The mass of false signals is another major drawback of MA-based strategies. And it manifests itself, as mentioned above, the stronger, the shorter the periods of the moving averages used. A number of methods are used to filter out these types of false signals. In order to separate the wheat from the chaff, or, in our case, true signals from false ones, traders use three main methods: Filtering a signal by minimum price range involves opening a corresponding position only after the price has moved a certain specified distance in the “correct” direction after this signal is received. For example, a trader set the size of the minimum price range to 5 points. Then, when the price crosses the moving average line from bottom to top, he will make a purchase no earlier than the moment when the price moves up from the point of this intersection by the specified 5 points. It is important here not to overdo it with the size of this very minimum price range. Here you need to find a middle ground in order to insure yourself against a pending signal, and not miss out on all your potential profit. Filtering by minimum time range implies waiting a certain time from the moment the signal is received. Let's say a trader receives a sell signal, but he does not sell until a specified amount of time has passed. And only after this, provided that the received signal remains valid (the lines did not turn in the opposite direction, their reverse intersection did not occur, or the intersection that served as the signal remained on the chart), he makes a deal. Filtering by using an “envelope” involves depicting the moving average not in the form of a separate line, but in the form of a strip consisting of two lines spaced from the main line in both directions at equal distances (usually specified by percentage). The essence of the method is that the signal is considered confirmed only after the price has passed through the entire band. In essence, this method is nothing more than a special case of filtering a signal by a minimum price range, only this range is specified here by a non-specific value in points, but in percentage.Smoothed Moving Average (SMMA)
How to use Moving average in Forex trading
Using a moving average as a support/resistance level
Using a moving average as a trend line
Trading at the intersection of two moving averages
Conclusion on moving averages (MA)
Setting up a moving average in the MT4 terminal
Trading Strategies Based on Moving Averages
With a descending MA, we look for entry points into selling, and with an ascending MA, into purchases (using the auxiliary indicator Stochastic) 
Illustration of a strategy based on the intersection of fast and slow MAs 
Examples of transactions where the price crosses the MA line Main disadvantages of MA-based strategies
Methods for filtering false signals
