The moving average is one of the most prominent indicators in the Forex market. The majority of the elite traders rely on the moving average to find the potential trade signals in the market. But if you do so some research, you will be surprised to know that very few traders know the proper way to use the moving average. Most of the retail traders mess things up and loses a significant of capital while using the indicators.
Skilled traders always suggest the novice traders learn the proper use of the moving average in the demo account. You might be new to this market but once you start exploring the important details, you can trade this market with a high level of precision. Now let’s see some of the hidden functions of the moving average.
Dynamic trading levels
The moving average acts as the dynamic trading level. If you carefully assess the moving average, you should notice that the price is always respecting these levels. But do not think that the support and resistance levels in the moving average are always going to give you positive results. At times, you will be losing money even after effectively using the moving average. This is due to the fact the market nature is unpredictable. While taking the reading from the moving average, try to focus on the higher time frame as it will give you a better chance to make a profit. So, ignore using the lower time frame since you will never find reliable trading levels.
Helps you to find trend direction
As a new trader in the Forex market, you should always look for the premium brokers like Saxo broker Dubai. If you trade with a good broker, you will gain access to the professional trading environment, thus making the right decision in the investment industry will become easier. Moreover, the data reading in the moving average will be extremely precise. So, you can find the direction of the trend with a great level of ease. If the slope of the moving average points to the north, you should consider the market is in the uptrend. On the contrary, if the moving average slope is negative, you should consider the market is in the downtrend. Based on the direction of the moving average, you can easily take your trades and make a decent profit without having much hassle.
Entry and exit point
People who know the proper use of the moving average can easily find the entry and exit point of the market. For instance, if you take the trades in the 100-day moving average, you may set the stop-loss price by using the moving average. But in general, traders rely on the price action confirmation signals while using the moving average. So, merging the moving average with the price action confirmation signals is one of the most important steps to polish your trade execution process. But remember, you should not use the moving average with a lower period. If you do so, you will mess things up and loses a significant portion of your trading capital.
Allows you to ride the trend
If you learn the proper use of the moving average, you should be able to ride the trend. Most novice traders don’t have any idea to ride the trend. They usually mess things up by using too many tools. Instead of doing that, learn to use the moving average effectively and you will become comfortable with your trade execution process. Focus on long-term goals and try to develop a strategic method so that you can earn decent money. While doing the data analysis with help of the moving average, rely on the daily or the hourly time frame as it will give you a better picture of this market. Last but not the least, never lose confidence in your actions.