Adding a simple moving average (SMA) of 200 to your forex chart is a popular trading strategy used by many traders, both novice and experienced. The SMA 200 is a popular technical indicator that helps traders identify trends in the market and make informed trading decisions. In this article, we’ll explain how to add the SMA 200 to your forex chart and how to use it to improve your trading performance.
What is the SMA 200?
The SMA 200 is a technical indicator that calculates the average price of a currency pair over the past 200 periods. It is a lagging indicator, which means that it reacts to price movements after they occur. The SMA 200 is used to identify the long-term trend of a currency pair and is often used in conjunction with other technical indicators to confirm or validate trading signals.
How to add the SMA 200 to your forex chart
Adding the SMA 200 to your forex chart is a simple process that can be done in a few steps. Here’s how:
Step 1: Open your forex trading platform and select the currency pair you want to trade.
Step 2: Click on the “Indicators” button or navigate to the “Insert” menu and select “Indicators”.
Step 3: In the “Indicators” menu, select “Moving Average”.
Step 4: In the “Moving Average” menu, select “Simple Moving Average”.
Step 5: Set the “Period” to “200” and select the “Color” you want for the SMA 200 line.
Step 6: Click “OK” to add the SMA 200 to your forex chart.
Using the SMA 200 to improve your trading performance
Now that you’ve added the SMA 200 to your forex chart, it’s time to learn how to use it to improve your trading performance. Here are some tips:
1. Identify the long-term trend
The SMA 200 is primarily used to identify the long-term trend of a currency pair. If the SMA 200 is sloping upwards, it indicates an uptrend, while a downward slope indicates a downtrend. Traders can use this information to make informed trading decisions and enter trades in the direction of the trend.
2. Use the SMA 200 as a support or resistance level
The SMA 200 can also be used as a support or resistance level. If the price of a currency pair is above the SMA 200, it can act as a support level, while if the price is below the SMA 200, it can act as a resistance level. Traders can use this information to set their stop loss and take profit levels and manage their trades accordingly.
3. Look for crossovers
Crossovers occur when the price of a currency pair crosses above or below the SMA 200. A crossover above the SMA 200 indicates a bullish signal, while a crossover below the SMA 200 indicates a bearish signal. Traders can use crossovers in conjunction with other technical indicators to confirm or validate trading signals.
4. Use the SMA 200 in conjunction with other technical indicators
The SMA 200 is often used in conjunction with other technical indicators to confirm or validate trading signals. For example, traders may use the SMA 200 in combination with the Relative Strength Index (RSI) to identify overbought or oversold conditions in the market. Traders can use this information to enter trades in the direction of the trend and manage their trades accordingly.
Conclusion
Adding the SMA 200 to your forex chart is a simple process that can help you identify the long-term trend of a currency pair and make informed trading decisions. Traders can use the SMA 200 as a support or resistance level, look for crossovers, and use it in conjunction with other technical indicators to improve their trading performance. However, it’s important to remember that no technical indicator is perfect, and traders should always use risk management techniques to protect their capital.
