{"id":94747,"date":"2016-08-31T06:39:15","date_gmt":"2016-08-31T10:39:15","guid":{"rendered":"http:\/\/countingpips.com\/?p=94747"},"modified":"2016-08-25T06:39:37","modified_gmt":"2016-08-25T10:39:37","slug":"learn-to-apply-moving-average-trading-strategy","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/08\/learn-to-apply-moving-average-trading-strategy\/","title":{"rendered":"Learn to apply moving average trading strategy"},"content":{"rendered":"
August 31, 2016<\/div>
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By Admiral Markets<\/b><\/p>\n

\"MA<\/p>\n

Dear Traders,<\/p>\n

Welcome to the second part of my coverage on moving averages (MA).<\/p>\n

Part 1<\/a> gave you the basics of Forex moving averages, while this post is focused on teaching you how to apply MA’s for analytic and trading purposes.<\/p>\n

So, if you want to know specifics like how to apply the angle of an MA or how to avoid the danger of overlapping MA’s – read on.<\/p>\n

\"open<\/a><\/p>\n

MA angle reveals key info<\/h2>\n

The angle of a Forex moving average, is an important indication of momentum or lack of it.<\/p>

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For example, a steeply angled moving average confirms strong momentum.<\/p>\n

But when the angle of the moving average is choppy, flat or shallow – it indicates a corrective market phase.<\/p>\n

What kind of angle is steep or shallow?<\/p>\n

The best rule-of-thumb is to imagine the hands of a clock, whereby the MA is considered:<\/p>\n

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  1. flat when the MA direction is between 2 and 4<\/li>\n
  2. trending when MA direction is between 4 and 5 (bearish) or 1 and 2 (bullish)<\/li>\n
  3. impulsive when the MA direction is between 5 and 6 (bearish) or 12 and 1 (bullish).<\/li>\n<\/ol>\n

    \"Clock2.png\"<\/p>\n

    The angle of moving averages:<\/p>\n

    …together with candlestick<\/u><\/a> close and patterns\u2026<\/p>\n

    …helps identify sustainable and false breakouts<\/u><\/a> in the Forex market.<\/p>\n

    It also indicates when the momentum might be losing its pace or reversing in the opposite direction, which occurs when:<\/p>\n

      \n
    1. the degree of the angle changes, or<\/li>\n
    2. the angle itself switches (from bearish to bullish or vice versa).<\/li>\n<\/ol>\n

      \"MA<\/p>\n

      I use a special Forex moving average indicator that automatically changes the colour of the MA line, when the angle switches from bearish to bullish or from bullish to bearish.<\/p>\n

      If you would like this indicator too, please send us the following message<\/u><\/a>:<\/p>\n

      “Hi. Please ask Chris Svorcik to send me the special MA indicator that changes colour.”<\/p>\n

      Overlapping moving averages indicate danger<\/h2>\n

      Momentum and trends will last for a while, but the market will eventually build a sizeable correction.<\/p>\n

      You can recognize when a consolidation starts, by analysing price and moving averages:<\/p>\n

      …momentum is strongest when price is not hitting the MA’s and the MA’s are not hitting each other…<\/p>\n

      …while consolidation is present when the MA’s are on top of each other and the angle of the MA’s are generally flat or start to flatten out.<\/p>\n

      \"MA<\/p>\n

      During a consolidation zone, price does not tend to use the moving averages as support or resistance – but rather as a move back to the mean.<\/p>\n

      In fact, price will use the moving average as a mid-point while it oscillates above and below it.<\/p>\n

      Maybe you already knew this?<\/p>\n

      If not, here’s two more things you probably don’t know and should remember.<\/p>\n

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      1. In consolidation zones, price is not quick enough to pull away from the mean and the MA becomes a gravitational pull on price<\/li>\n
      2. In trends, price has sufficient pace and the momentum is able to escape away from the MA’s, which in turn changes the role of the MA from a gravity pull towards a support or resistance level.<\/li>\n<\/ol>\n

        See this strategy video below, for more detailed information on how financial markets experience consistent battle between speed and gravity.<\/p>\n