Day Trading Moving Average

Moving Average Indicator are known as the most traded forex trend indicator in the world and this indicator can be an accurate signal for your day trading. Usually moving average indicator are traded for defining the direction of the market trend, determine the support and resistance, and also this tool can help us in define entry or exit level. In this post I will share about how to trade moving average in day trading.

Moving Average

It is crucial to understand what is the moving average before we use it in our trading system. This tool is forex trend indicators that are used to calculate the average price showed on our trading chart for a certain of time. You can use 20, 50, or even 100 period moving average, but in this article we sill focus on the 200 period moving average indicator.

In the image above you can see the market price is moving bearish, and the moving average indicator also moving lower as well. At this situation the market price is trading quicker that the moving average indicator giving a good trading signal that the market is in strong bearish trend. Understand this, you can trade and use moving average indicator into your trading.

The main purposes of a moving average indicator is to define the market trend direction. This is an important point for day traders, that is because the market trend will impact your trading analysis. The method is that the good trading situation for us to pick a good level for open a trading position would be in a bearish trend as the market price is moving bearish. To determine a bearish trend, the market price should be move below the moving average trend indicator.

This analysis changes if the market price move above the moving average. When the market price only move bearish and keeps below the moving average indicator, you should only look for a new short trading position.