This is the second article in our SMA series. The SMA was designed to smooth out the effects of price volatility and create a clearer picture of changing price trends. Traders use an SMA, sometimes in concert with another SMA for a different period, to signal confirmation of a change in price behavior. The benefit of the SMA indicator is its visual simplicity.

Traders can quickly assess the prevailing trend of price behavior from the direction of the SMA. Care must be taken since the SMA is a lagging indicator and may not adjust rapidly to volatility in the market.

Shorter settings can be used, but the tendency for false signals also increases in reverse proportion. The key points of reference are when the SMA crosses over the pricing candlesticks.

In these cases, the crossovers of the SMA lines become a key point of reference. Skill in interpreting and understanding SMA alerts must be developed over time, and complementing the SMA tool with another indicator is always recommended for further confirmation of potential trend changes.

Moving Average Strategies

In the next article on the SMA indicator, we will put all of this information together to illustrate a simple trading system using SMA analysis. Learn various technical strategies based on crossovers.

Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit.

Best Moving Average Strategies for Day Trading in Forex - ForexBoat Trading Academy

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