Why Moving Average?
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Thread: Why Moving Average?

  1. #1
    Hello everybody. I've been considering the reason(s) behind our usage of MOVING AVERAGES. Why is it that we use the parameters we use etc.. . ?

    Why can you use SMA rather than EMA,SMMA or WMA? And what's a EMA or SMA ( I don't mean the total of this abreviation), actually. . .what does it do?

    Why slow EMA, fast EMA and MACD SMA? What's MACD not available in Fast and slow (SMA,SMMA or WMA)?

    What are you tyring to reach using SMA, EMA, WMA or even SMMA? What are these tools really designed for/to reach etc.. . ?

    I know MOVING AVERAGES are basically utilized to average x numbers of candles, I think there's still more. I will be happy IF those with vast indior knowledge data base can help answer my questions.

    Are onto something.

  2. #2
    It's possible to identify ranging/trending markets without MAs. MAs are now lagging. On the flip side, if you're trading long enough, then you also can observe patterns that are made relatively to your MAs, like you may identify patterns with no MAs. IMHO a individual should determine the method that suites him and stay with it. As long as you've got good money management and discipline,it doesn't matter exactly what are your tools.

  3. #3
    Quote Originally Posted by ;
    You are able to identify ranging/trending markets without MAs. MAs are now lagging.
    What makes MAs work is the fact that they're lagging....lol. Whenever price action suddenly overtakes a MA to the upside or downside, it can be an indiion of a sudden shift in sentiment. When there is a sudden change in price, the MAs are an excellent benchmark for support/resistance. If the MAs moved immediately (no lag), you wouldn't have a reliable reference point to target support/resistance. An experienced chartist can forecast price movement when prices are converging or diverging away from MAs.

  4. #4
    Quote Originally Posted by ;
    What makes MAs work is that they're lagging....lol.
    This is exactly what I wrote, It is a matter of perspective.
    There are traders that don't want MAs to discover a sudden change in a sentiment. S/R MAs can be detected without by you.

  5. #5
    Quote Originally Posted by ;
    This is precisely what I wrote, it's a matter of perspective.
    I see your point; I simply wanted to address the idea of lagging. People abuse this term a little....this concept only applies to novice traders that think they can utilize MA xovers as an entry. In this aspect, you will get smoked since 99% of the time, the move will have already completed by now the MA xover happens. Butagain, a seasoned chartist does not enter on a MA xover....it is how prices regress to the mean MA, that chartist pay attention to. I use simple supply/demand theories with the Help of MAs to guide my optimal entrance points

  6. #6
    Great thread - pity it appears to have died off as Moving Averages are such a powerful but easily dismissed tool. Perhaps it it is their simplicity which makes them poorly understood and ignored. All MAs are smoothing functions. That is there point, to smooth out the variations in the observed information - in this case Foreign Exchange prices. The greater the number of data points or candles the higher the smoothing function and the lower the influence of each candle on the calculated average. Graphically, of course a MA60 will be flatter and smoother and react slower to price changes than a MA5. Graph a SMA1, you may see it is equivalent to a line chart of prices.

    With a SMA each candle has the exact same weighting, irrespective of where it is loed. By way of example, using a SMA60 each candle has an equivalent weighting of 1/60. On a M1 chart, it follows that the candle which shut one hour or 60 minutes ago has the exact same weighting as the most recently closed candle. Is this a fair assumption to make?

    Is not it intuitively attractive for us to put more emphasis and a greater weighting on more recent prices than those that happened a while ago. This is the logic of EMAs and WMAs and it makes sense. These moving averages will react more to recent price action than a SMA - in case that is desired.

    What price ought to be utilized to figure the various MAs on Foreign Exchange charting progr; open, high, low, near...? The median price ((H L)/two )for a period period (candle) is itself a average or mean of the price action that happened from open to close. Calculating a typical using averages will maintain even a statistician happy.

    Anyone considering measuring price volatility will need to understand MAs as the mean is central to the calculation of variant and thus standard deviation. So the position of price relative to this MA is essential. MAs rule!

  7. #7
    Only my two cents opinion.

    I discovered a no. Of professional traders utilize 20/21 MA to their Daily chart analysts. Btw the BB inventor uses 20 MA.

    I also noticed prices would eventually reunite to 20 MA to resume its trend or counter trend.

    I use 20 MA as a spring board (such as SL and RL) to discover PA for entrances.
    Recently after assessing SMA, EMA vs LWMA, I chose to clinic with 20 LWMA.
    Https://forexintuitive.com/discussio...2-gbp-usd.html

    perhaps It's just an individual taste, as there is no right or wrong in fx trading, more importantly It's his trading egy to make good



    cheers

  8. #8
    Wow,

    The last time I posted on this board about MAs had been 7/31/10. At the moment , I THOUGHT I knew just about all there was to learn about MAs. On 4/22/11, I had a quantam leap in my comprehension of MAs; which goes to prove that you never stop learning when it comes to trading. Than you can imagine, mAs are more complied. They communie things that take years to translate.

  9. #9
    Quote Originally Posted by ;
    On 4/22/11, I had a quantam leap in my comprehension of MAs; that goes to prove that you never stop learning when it comes to trading. MAs are a lot more complied than you can ever imagine. They communie things which take years to interpret.
    Well, this sounds like an interesting discovery afterward. Would you care to describe???

  10. #10
    Quote Originally Posted by ;
    Wow,

    The last time I posted on this board concerning MAs was 7/31/10. At the moment I THOUGHT I knew just about everything there was to know about MAs. On 4/22/11, I'd a quantam leap in my understanding of MAs; that goes to prove that you never stop learning when it comes to trading. MAs are much more complied than you can ever imagine. They communie items that take years to interpret.
    agreed with u, troi. I one never quit learning. Additionally, I learnt to be patience and simplify in my own trading... as we all know fx is even more complied than just ma. Let all share experience to increase our trading and make

    cheers

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