The moving average is one of the most flexible indicators used in forex trading today. It can be an invaluable aspect of confirming trends, spotting reversals, or projecting the future path of price itself. No matter how or why you’re trading forex, moving averages can help you achieve your goals in the marketplace.
From a practical standpoint, all you need to use the moving average indicator is a strong charting package. Moving averages are applied as chart overlays, meaning that they are placed directly on top of pricing bars. This makes any moving average indicator user-friendly and intuitive.
Read on to learn more about how you can set up moving averages on the powerful Metatrader 4 (MT4) platform.
A charting application that is worth its salt is user-friendly. That’s one area where MT4 excels: it is an intuitive, ready-to-use interface. Adding a simple moving average, or any moving average indicator to your charts is straightforward.
Let us walk you through it!
1. Firstly, open your MT4 platform. To add a moving average to your chart simply go to edit, found in the top left-hand corner of MT4, scroll over ‘Indicators’ and click the option labeled ‘Moving Average’.
2. After selecting moving average from the list above, a new window will pop up. You will see 3 tabs on that window.
In the Parameters tab, you can set your moving average value on the period box (which determines how long the average will be), select your preferred MA method, and select what this will apply to (e.g. Close, Open, High, Low). Each of these methods refer to a data point taken from each price bar. For instance, a moving average indicator based on closing prices will reflect each bar’s settlement value. This is true no matter if you are applying a smoothed moving average or any average indicator.
You can also customise the MA colours by clicking on Style. This is a nice feature in that you can make your moving average as distinct as you want it to be. If you want your smoothed moving average to be bright yellow, go for it!
3. In the Level tab, you can set a channel with the main MA. Click on Add, then double click on Level and put distance value from your MA. This option is not compulsory. You can avoid this parameter or keep the value at 00. Once again, it’s your moving average indicator – build one that is best for your needs.
4. In the ‘Visualization’ tab, you can see the time frame where you can use this moving average. If you select ‘All timeframes’, then you will be able to see your MA on all time frames. The All Timeframes option is ideal for trading forex on multiple time frames. It is well-suited for spotting a buy or sell signal or observing how a price bar’s current closing price develops with respect to your chosen moving average.
5. And that’s it! Click OK and voila just like that you have a simple moving average indicator on your chart.
One of the great things about forex trading is there is always a wealth of options. Technical analysis is certainly no different, as there are literally hundreds of public domain indicators to choose from. In the case of the moving average, there are three strong alternatives:
In reality, each of these indicators can be useful in determining market state, as well as building viable buy and sell signals. However, your trading style will be a deciding factor in which is right for you. Below are a few areas where each moving average excels:
When choosing a moving average for your analytics, it’s important to remember your primary reasons for conducting the study. For example, if you are scalping forex pairs on ultra short-term time frames, then the price action of the previous period is vital to decision making.
In addition, the current closing price is also more relevant than the closing prices of pricing bars in the distant past. So, for active scalpers, exponential moving averages are superior to smoothed moving averages or the simple moving average.
Remember, the whole point of technical analysis is to place price action into a manageable context. This can be done by implementing the various types of the moving average indicator. From the exponential moving average to the simple moving average, it’s all good! Just be sure that the one you choose is best suited for your approach to the markets.
Perhaps the single greatest thing about technical analysis is that the trader’s initial investment is zero. All you need is a robust platform like MT4, time, and a bit of forex aptitude. Then, it’s relatively simple to apply moving averages, Bollinger Bands, or other indicators.
The MT4 moving average indicator can be an invaluable tool for the active forex trader. It may be developed according to a variety of input parameters, such as opens, midpoints, medians, and closing prices.
Also, the moving average can be used to find a timely buy or sell signal. All you have to do is select a simple moving average, exponential moving average, or smoothed moving average; then, apply it via MT4’s automated framework. It’s as simple as that.
Now that you’re familiar with moving averages, on to the next lesson!
Mimic how professionals trade. Discover your inner talent. Learn everything you need to know about trading the markets from beginner level to the most advanced, helping you to create critical skills and techniques to you can apply in your trading right away.
Mimic how professionals trade. Discover your inner talent.
Learn everything you need to know about trading the markets from beginner level to the most advanced, helping you to create critical skills and techniques to you can apply in your trading right away.
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