Trade principles of trade system – sliding average.
Reading of price schedules without Sliding averages resembles preparation of pie without oil or eggs. These simple lines above or below the current price can tell a lot, and their use in market interpretation is really unprecedented. Better to say, they are the most valuable indicators in the technical analysis.
You can trade without Sliding averages, but, doing it, you risk very strongly. Eventually, these lines represent median levels where market players make important decisions to do purchase or sale. Therefore, it makes sense to predict that they are going to do, before, instead of after.
Principles which you can use at trade on Sliding averages:
1. 20-day Sliding average usually marks a short-term trend, 50-day Sliding average – an intermediate term trend, and 200-day Sliding average is an indicator of a long-term market trend.
2. These three Sliding averages represent natural borders for price corrections. Two arguments speak well for these values: the First, they опредеяют levels where removal of profit and acceptance of losses should weaken after strong price movement. In the second, their general recognition induces market players to make self-realization of this strategy every time when the price comes nearer to these levels.
3. Sliding averages submit false signals during lateral trade because they are the indicators following a trend which measure an ascending or descending impulse. They lose the efficiency in the markets showing weak or absent movement of the prices.
4. The characteristic of Sliding averages changes, as soon as they smooth out and turn over. Turn Sliding to horizontal position specifies to average in loss of an impulse for the given time format. It increases chances of that the price will cross Sliding average rather easily. When Sliding averages of different length are built in a horizontal line the close friend from the friend, the price often fluctuates back and forth across these lines, creating a lot of “market noise”.
5. Sliding averages submit constant signals because they are formed directly at price top. Their relative correlation with price development changes with each bar. They also show active interrelation in the form of a convergence – divergences with all other kinds of support and resistance.
6. Use ЕМА, for longer time formats, but pass to simple Sliding averages, or SMA, for shorter time formats. ЕМА give bigger weight to recent change of the price while SMA considers each price action equally.
7. Short-term SMA allow the trader to аштв щге how еру other traders will operate in the market. Market public uses it because they do not understand Sliding averages. Good intraday signals rely more on other market participants than on a current situation of technical aspects
For those who want to participate in forex trading should start from learning the basics of this market to make sure you do not experience problems with this industry.