Forex Meta Trader: What is MA?
If you are a forex trader, you may have heard about Meta Trader. It is a popular trading platform that is used by many traders across the world. One of its key features is the Moving Average (MA) indicator. In this article, we will explain what MA is and how it is used in forex trading.
What is Moving Average (MA)?
Moving Average is a technical indicator that is used to analyze the trend of a currency pair. It is a simple mathematical calculation that shows the average price of a currency pair over a specific period of time. The period of time can be a few minutes, hours, days, weeks, or months, depending on the trader’s preference.
MA is a lagging indicator, which means it follows the price action of a currency pair. It does not predict the future price movement of a currency pair but helps traders to identify the current trend. MA is used to smooth out the price action of a currency pair and filter out the noise that is caused by the volatility of the market.
How to Calculate Moving Average (MA)?
There are different types of moving averages, but the most commonly used are Simple Moving Average (SMA) and Exponential Moving Average (EMA).
Simple Moving Average (SMA) is the average price of a currency pair over a specific period of time. To calculate SMA, you need to add up the closing prices of a currency pair for a specific period of time and divide the sum by the number of periods.
For example, if you want to calculate the 20-period SMA of EUR/USD, you need to add up the closing prices of EUR/USD for the past 20 days and divide the sum by 20.
Exponential Moving Average (EMA) is similar to SMA but gives more weight to the recent price action of a currency pair. It is calculated by taking the weighted average of the closing prices of a currency pair for a specific period of time.
How to Use Moving Average (MA) in Forex Trading?
Moving Average is a versatile indicator that can be used in different ways. Here are some of the ways traders use MA in forex trading:
Trend Identification: MA is used to identify the trend of a currency pair. When the price of a currency pair is above the MA, it is considered to be in an uptrend, and when the price is below the MA, it is considered to be in a downtrend.
Support and Resistance: MA is used to identify support and resistance levels. When the price of a currency pair is above the MA, the MA acts as a support level, and when the price is below the MA, the MA acts as a resistance level.
Crossover Strategy: MA is used in crossover strategy, where traders use two MAs of different periods. When the short-term MA crosses over the long-term MA, it is considered to be a bullish signal, and when the short-term MA crosses below the long-term MA, it is considered to be a bearish signal.
Conclusion
Moving Average is a popular technical indicator that is used by many forex traders. It is a simple mathematical calculation that shows the average price of a currency pair over a specific period of time. MA is used to identify the trend of a currency pair, support and resistance levels, and in crossover strategy. It is a lagging indicator that follows the price action of a currency pair and helps traders to filter out the noise caused by the volatility of the market.
