Personally, I use three or four moving averages on my charts. The idea is that when the short-term interval moving average crosses above the slower longer-term interval moving average, momentum is building to the upside and buyers will jump in and continue to push higher. These are fake outs that we should be aware of and this is another reason why we should use more than one moving average. One of the other major cons of these systems is also they are typically discovered early in your trading career.
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This moving average trading strategy uses the EMA, because this type of average is designed to respond quickly to price changes.
Here are the strategy steps.
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Emotions take control of the decision-making process and the next thing you know, the account is gone. The following setup appears on the eurusd hourly chart below: EMA(50) and EMA(200) RSI(14) First, one should wait for either a golden or a death cross to form. Strategy Set-Up, any currency pair and timeframe should work. Add an exponential moving average to the chart, set its period to 9, apply to Close, set color to red (optional) this is your fast moving average (FMA). Moving averages lag current prices. It averages the closing prices for the candles in the period considered. As a rule of thumb, the bigger the period, the stronger the support and resistance level. Consider the Forex and the stock market. As always, theres a trick. At any one moment, there are two values plotted on the screen: the actual price the MA value, the value of moving averages is different than the actual price.