Conclusion

In Filters

Moving averages can be used in filter rules. With a comfortable percentage, filter rules can be used to try and eliminate false signals. A trader can decide to execute a trade if the price moves above the MA by 10%. This will confirm to that trader that the trend is actually happening and that the movement above the moving average by the price is not a whipsaw. The trader must be careful about which percentages he or she sets as a percentage that is too high may cause one to “miss the boat”.

How to use moving averages in Visual Trading?

The Visual Trading software handles all the work when a trader wants to see moving averages on screen. The trader just has to select, by right clicking on the graph window, to add the moving average as an indicator. The trader picks the period, the price to be considered in the calculation, and what kind of moving average one may need (simple, weighted, or exponential). The measure of the period can be changed on the bottom menu. The Visual Trading software also offers sine weighted, triangular and end point as options. The cmsfx.com website already offers a video on how to add indicators into a graph, and it uses the moving average as its example.

Conclusion

As mentioned before, the moving average is one of the most commonly used devices to measure trends. The data is precise and its output as a line can be customized to ones preferences. It has a lag and is a following indicator as opposed to a leading one. Using the moving average is one of the most basic ways to generate buy and sell signals in technical trading. It is sound advice to trade in the direction of the trend. Since a MA is a lagging indicator, it can help to make sure a trader is trading with the trend. Moving Averages are not helpful when currency is in a trading range. Moving averages will keep a trader in (longer than desired) and give late signals. A trader will not be able to get out at the top or in at the bottom with moving averages alone. Therefore moving averages should be used in conjunction with other tools as complements.

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