:However it's good to know these basics because when we come to its settings and strategies that we would be discussing, u should know why we are choosing which value for the period of our moving average
There are 2 types of Moving averages
[1) *Simple Moving Average*
2.) *Exponential Moving Average*
Simple moving average, just sums up the average for you without giving weight to recent price actions, so if there was a previous spike, it would add it in its calculations.
: Let's briefly explain both
: Let's take same currency pair in above as an example..
Let's say the closing piece shot up in the 2nd value and we have
$12, $35, $10, $11, $13
: If you calculate the average of the above...
That extreme value of $35 would affect the average of these set of numbers
Hence distorting the average
This is corrected by the use of Exponential moving average
However most traders still use Simple moving average, because even though it's slow to react u are less likely to encountering fake outs (fake outs are like wrong signals, we would see that later)
When some Traders use EMA are mostly after Volatile News events, but apart from that, generally Simple Moving average is still the most popular
So let's quickly go to the practical section and add Moving average to our MT4
EVEN IF YOU CAN ADD YOURS NOW
STAY CALM AND CHAT ME UP AFTER THE LECTURES TO AID YOU
SO, IF YOU CAN'T ADD YOURS USING THE STEPS I WOULD HIGHLIGHT
ITS PERFECTLY NORMAL
U MIGHT STILL BE A BEGINNER
SO USE MY OWN IMAGES TO LEARN FOR TODAY
THEN AT THE END OF THE LECTURES
U CAN CHAT ME UP TO SHOW U
OPEN YOUR MT4
CLICK ON THAT ICON POINTED AT BY THE RED ARROW TO TAKE YOU TO YOUR CHARTS
: STEP 2
AFTER GETTING TO YOUR CHART PAGE.
CLICK ON THAT "f" ICON POINTED AT BY THE RED ARROW TO TAKE U TO WHERE YOU WOULD ADD INDICATORS
ON GETTING TO THIS NEXT PAGE
CLICK ON THAT MAIN CHART WINDOW ➕ SIGN
THIS WOULD NOW TAKE YOU TO WHERE YOU WOULD SEE ALL THE INDICATORS LISTED OUT.
SEARCH FOR MOVING AVERAGE AND CLICK ON IT
AFTER CLICKING ON THE MOVING AVERAGE.
IT WOULD TAKE U TO WHERE YOU CAN SEE THE SETTINGS FOR THE MOVING AVERAGE INDICATOR.
THERE YOU WOULD SEE THE VALUE OF THE PERIOD WRITTEN AS ""10""
THIS IS THE DEFAULT SETTINGS
CHANGE IT TO ""7""
ie Delete the "10" and type in "7"
CLICK ON ""DONE"" WRITTEN ABOVE AFTER YOU ARE THROUGH
IT WOULD AUTOMATICALLY DRAW THE "7" PERIOD MOVING AVERAGE FOR YOU ON YOUR CHART AS SHOWN BY THE RED LINE
SO YOU DON'T HAVE TO CALCULATE ANYTHING, THE CHART HAS CALCULATED IT AND DRAWN IT FOR YOU.
THE NEXT STEP IS TO GO BACK TO YOUR CHART AGAIN AND REPEAT FROM STEP 1 TO STEP 4
SO AS TO BRING YOU TO THIS SAME INDICATORS PAGE AGAIN
WHEN IT BRINGS YOU BACK HERE AGAIN
CLICK ON THE MOVING AVERAGE FOR THE SECOND TIME.
AS U DO SO IT WOULD BRING U BACK TO THE SETTINGS PAGE OF THE MOVING AVERAGE.
WHEN IT BRINGS YOU BACK THERE
REMEMBER YOU INITIALLY TYPED IN "7"
DELETE THE "7" AND TYPE IN ""14""
AFTER YOU HAVE TYPED IN THE "14" IN PLACE OF "7"
YOU WOULD SEE WHERE MY RED ARROW IS POINTING AT.
CLICK ON THERE TO CHANGE THE COLOR OF THIS SECOND MOVING AVERAGE THAT YOU WANT TO ADD.
REMEMBER THE FIRST WAS RED, SO YOU CAN MAKE THIS ONE BLUE
THIS IS TO DIFFERENTIATE IT FROM THE FIRST MOVING AVERAGE THAT YOU ADDED ON YOUR CHART
: AFTER YOU HAVE CHANGED THE COLOR TO A DIFFERENT COLOR
DON'T TAMPER WITH ANY OTHER SETTINGS AGAIN.
LEAVE THEM AT DEFAULT AND CLICK ON DONE ABOVE AS POINTED AT BY THE RED ARROW
AFTER YOU HAVE CLICKED ON ""DONE"
THE SECOND MOVING AVERAGE WOULD AUTOMATICALLY BE ADDED TO YOUR CHARTS.
YOU WOULD SEE SOMETHING LIKE THIS, SHOWING ONE RED LINE AND ONE BLUE LINE
So how do we trade with Moving Averages ,The basic principle u have to note in Moving Averages, is that they work well in Trending markets
: What is now a Trending market
A Trending market is one that it's either moving upwards or downwards...
Not just sideways
Hence Moving average works well, in this type of market..
So that u can correctly use it.
Because u would see most traders saying that MA is not working for them, without knowing that they used it in a wrong market condition
So in order of fast to slow
We can arrange these 6 MA as follows below
So the smaller the period, the fasterfree to ask any questions from comment