Learning Forex: Starting from this article you will learn the technical indicators. Before we begin, please note that technical indicators are not tools that can make you like a psychic. Technical indicators only help you to recognize the potential price movement.
The first time you will discuss the technical indicator called Moving Average. Moving average (hereinafter we shall refer to as MA) is one indicator of the trend is quite popular. This indicator "refine" the price movement within a certain timeframe, so you are easy to identify trends or direction of price movement in general. Let's look at the picture below.
The picture above is one hourly chart GBP / USD. Red line written on the graph is just one example of the moving average indicator that has a period of 50 (MA 50). That is, these indicators take candlestick price data from the last 50, and described it as a line that you see it. The standard price is used typically is the closing price (close), but there are several methods that use open, high, or low. But we will not discuss it at this time.
Back to the picture above, you can see that MA can show you the trend is ongoing. If the general price is below the MA, the current trend is a downtrend.Conversely, if prices generally moving above the MA, so the current trend is an uptrend. From the example above shows that the trend for the GBP / USD on the hourly chart 1 (hourly) is down (downtrend). Increasingly steep slope of the Supreme Court, then it means the trend is getting stronger. Thus, you can more easily predict the potential direction of further movement.MA could also serve as support and resistance. The term support and resistance is dynamic (dynamic support and resistance). So named because it moves according to the movement of prices.At the time of the uptrend, MA serves as support. Conversely when the downtrend, MA serves as resistance.Okay, maybe you already can not wait to taste the recipes using MA's trading. Patience ... even Utut Adianto also learn the basics of chess first anyway before becoming Grand Master.All right, we'll go a step further.MA in learning about this, you'll only discuss two popular types of MA only, namely:1. Simple Moving Average (SMA)2. Exponential Moving Average (EMA)
You will learn the basics first, and only later you will learn strategies. Okay, here it is ....Simple Moving Average (SMA)Simple Moving Average (SMA) is the most simple MA. Yes, according to its name: simple. But do not underestimate the ability of high school this simple,
because with the proper use of it can lead you to recognize the price
movement.If
you are using SMA 50 at 1 hourly chart, the 50 SMA that you see is the
result of the sum of the last 50 closing prices, and the sum was divided
again with 50. From the calculations that you can obtain the value of
the average of the closing prices 50 hours.It was to be the picture right? Okay, let's move on.As
was said, in practice you do not need to bother to count the high
school, trading platform which already provides the tools you use. Well, then why bother to learn the calculation? The goal is just so you have an idea of what exactly this high school. Also that you have a basic if you later want to modify the SMA is in line with your strategy later.As noted at the outset: MA "refine" the price movement. The greater the period used the more "subtle" MA also produced. The more subtle MA is generated it will be increasingly embraced it reacts to the price movement.Let's see a comparison between the SMA 20 SMA 50 below.
Well, look right? SMA 20 blue has a canting-liukan more aggressive compared with the SMA 50 is red. This shows that the SMA 20 which have shorter periods quicker to react
to price movements, while the SMA 50 tends to be slower than the SMA
20. SMA 50 look more "calm", not as "wild" SMA 20.By observing both SMA above you can see that the market is in a state trending. Both high school that you see on the chart above illustrates the direction of the general trend, the downtrend.On the topic of the more you will learn strategies use of this high
school, weaknesses and how to anticipate the weakness of the high
school.
Exponential Moving Average (EMA)
EMA calculation is not as simple as high school. EMA gives more weight in the calculation of the average price within a certain timeframe. The effect is EMA tend to be more sensitive to price movements, so the EMA to move a little more aggressive than high school.
The picture above shows the SMA and EMA are plotted on the same graph. The period used also both 50 but a different method of calculation. MA blue is the EMA, while the red MA is high school. You
can see that the 50 EMA is always closer to the SMA 50. This means that
more represents the price movement EMA (price action) rather than high
school. In other words, EMA further illustrate what is happening in the market today.
SMA or EMA?
Maybe now you'll shout, "So which one should I use? SMA or EMA? "Hehe ... do not confuse ya. EMA and SMA has its own advantages and disadvantages. We discussed one by one.If you are an aggressive trader and want to use the MA that reacts quickly to price movements, the EMA is the right choice. EMA can help you seize opportunities faster than high school. Thus the profit that you can get will certainly be greater. But the drawback is you may get trapped by fake signal (false signals) provided by EMA.Well, SMA itself is the opposite of the EMA. SMA responds more slowly at the price movement than EMA. Thus, the opportunity provided will be slower to appear. That is, the profit generated will be smaller. But the possibility of being trapped by fake signal is smaller.So choose which one? Up to you. Yes, really up to you. You already know the advantages and disadvantages of each MA. Choose according to your character.
Use of Moving Average
Always remember this sentence:"IF PRICES GENERALLY MOVING IN THE MA, THE TRENDS THAT ARE UNDERWAY uptrend. OTHERWISE IF THE PRICE IN GENERAL ARE UNDER MA, THE TRENDS THAT ARE UNDERWAY downtrend. "Easy right? This is the basic principle of the use of MA. Thus, be careful if the price moves through MA (breakout), because it
is an initial indication (not certainty) that the trend will change
direction.Remember also that the uptrend best strategy is to Buy. Conversely, when the downtrend best strategy is Sell.At the time of the uptrend, MA you can use as a reference area to buy. Conversely, when the downtrend, MA you can use as a reference area to sell. The strategy usually applied is a trading bounce.Let us look at the following picture:
In the picture above shows the 50 SMA indicator is plotted on a graph 1 hour late. It is seen that the price was corrected and approached the SMA 50 and bounces. Thus you obtain confirmation that the reflection occurs. Keep in mind that if you are going to do to buy using MA, then make sure that the MA line is on the rise (up).
On the sell strategy, which do in fact just the opposite of the strategy of buy. When prices experienced a pullback to the area MA, all you do is wait for confirmation bounce to sell. Note the picture below.
The above example also uses SMA 50. The first thing you should consider is whether the school lines are down. When prices experienced a pullback to area high school, make sure that the slope SMA remains down (down). In the picture above, we see that the price is exactly touching the SMA line. Indeed, there are false break, but soon the price moves down and moving below SMA. This situation illustrates that the bearish pressure is greater than bullish. At this time you should immediately take short positions with the
targets in the immediate support and stop loss at the nearest
resistance.Yes ... yes ... simple indeed, but remember: not always the scenario like this. Sometimes the bounce happens failed and instead turns around and penetrate prices MA with sadistic. That's why you need to put a stop loss. Later, with the strategy plus a good risk management (to be studied
later at a higher level), a simple strategy can generate a consistent
profit.Well, there is the development of the use of MA as an entry point. One popular development is to combine the two MA in one graph. The combination is quite popular is the combination of SMA 20 and SMA 50. This strategy we call "double MA".
The
idea is to take advantage of gaps which is the area between the two MA
(if later you are going to use SMA or EMA, same thing. It's just that in
this example we use the high school). From the picture above you can see that the sell is done when the price of entry into the area in question.If you are going to do a transaction with a double strategy MA then at least two of the following conditions must be met:1. Both MA must have the same slope direction. If going BUY, the slope of the MA should be upwards (rising). Conversely, if it will SELL, the slope of the MA must be downward (down).2. Price is located in the gap which is the area between the two MA.Okay, you already know that the MA loopholes you can exploit for entry. The question then is: when exactly you can buy or sell?For a while, you just use the first area. So when the price of admission and the candlestick closed in the area, then that's when you make a transaction. Later, there will be additional tools that can help you to determine the timing of when to take action. It will be studied at the next level. Stay tune!
Double MA Crossover
The intersection between the two MA you can make the signal or the first indication that the trend will change direction. It also can use as a signal for entry.
The picture above shows the SMA plotted in chart 1 hour late. Sell carried out when the second high school was intersected from the top down and buy when the intersection is done from the bottom up a signal.
The intersection of the two Supreme Court could also be utilized as an exit point if you had it been doing double MA Buy based strategy previously. So, other than as the entry point, the intersection of two MA can also be used as an exit point.
