In today forex faq, I will be talking about the use of various moving averages in trading and how it can help you to make some profits from the market.
Below is the question:
Does 20, 40, 80 moving averages helps to profiting trading?
Personally from my years of trading, the moving average is a very good tool to tell the trend of the market and in trading, the trend is simply our friends. If you are able to tell the trend with great accuracy, this means that you have a better chance of riding it to make profits from it.
So How Do You Use The Moving Averages To Tell The Trend
Step 1: Plot the 100, 200 and 400 Exponential Moving Averages
Step 2: Identify the slope of these moving averages
If they are sloping with good angle and separation, it means that you are seeing a strong trend
If they are cluster together, it means that the price is moving sideways at the moment.
One thing I want to emphasize here is that moving averages cannot be used to trigger an entry. It does not constitute an entry signal.
Therefore you will still need to have a reliable strategies on hand to help you make profits in trading.
If the entry of your strategy is in the direction of the trend, then you can set the target profit to a larger amount to give you a higher risk reward ratio.
If the entry of your strategy is against the trend, you may want to enter a smaller lot size or exit your trades slightly earlier whenever it hits a major S&R level.
When the price hits a S&R level when it is moving in the direction of the overall trend, it will have a better chance of breaking through it.
When the price hits a S&R level when it is moving against the direction of the overall trend, it will most likely get repelled by it.
By understanding the trend of the currency you are trading, you will have a better chance of getting a profitable trade and you will also have a higher chance of getting a trade with higher risk reward ratio.
I hope that I have answered your question and do let me know if you have any question