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How to set moving average in forex?

Moving average is one of the most popular indicators used in forex trading. It helps traders in identifying the trend and potential reversals in the market. The moving average is calculated by taking the average price of a currency pair over a specific period of time. The period of time can vary depending on the trader’s preference and the trading strategy. In this article, we will explain how to set moving average in forex.

Step 1: Choose the type of moving average

There are different types of moving averages, including simple moving average (SMA), exponential moving average (EMA), weighted moving average (WMA), and smoothed moving average (SMMA). The most commonly used moving averages are SMA and EMA. The SMA is calculated by taking the average price of a currency pair over a specific period of time, while the EMA gives more weight to recent price data. Traders can choose the type of moving average based on their preference and trading style.

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Step 2: Select the period of time

The period of time is the number of bars or candles used to calculate the moving average. The period of time can vary depending on the trader’s preference and the trading strategy. For example, a trader may use a 50-period moving average for a long-term trend, while a 20-period moving average may be used for a short-term trend. Traders can experiment with different periods of time to find the one that works best for their trading style.

Step 3: Apply the moving average to the chart

After choosing the type of moving average and the period of time, the next step is to apply the moving average to the chart. Most trading platforms have a built-in indicator for moving averages. Traders can select the indicator from the list of indicators and customize the settings according to their preference.

Step 4: Interpret the moving average

Once the moving average is applied to the chart, traders can use it to identify the trend and potential reversals in the market. When the price is above the moving average, it indicates an uptrend, while when the price is below the moving average, it indicates a downtrend. Traders can also look for crossovers between the price and the moving average to identify potential reversals in the market.

Step 5: Combine the moving average with other indicators

Moving average is a useful indicator, but it should not be used in isolation. Traders should combine it with other indicators to confirm the trend and potential reversals in the market. For example, traders can use the Relative Strength Index (RSI) to confirm oversold or overbought conditions in the market.

In conclusion, setting moving average in forex is a simple process that requires choosing the type of moving average, selecting the period of time, applying the moving average to the chart, interpreting the moving average, and combining it with other indicators. Traders should experiment with different settings and indicators to find the ones that work best for their trading style. Moving average is a powerful tool that can help traders in identifying the trend and potential reversals in the market.

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