It offers a way to approach trading computational indicators objective perspective of the activity and the movement of the same price, as it provides help and support for traders in the construction of speculation about price trends within a specified period of time as they are to contribute and help reduce anxiety and fears and reduce the large fraught with fears and avoid them. Moreover, the direction of this calculation methods to provide and secure signals, San fluctuations and market movements take place in the pre-market originally.
Several tools are used by trading computational methods of moving averages (oscillators are offering us signals whether a currency has reached saturation stage to sales or purchase), we’ll display the most important, but not all, namely:
- simple moving average and the exponential moving average.
- moving average convergence and divergence.
- Bollinger lines.
- parity system, cessation and reversal.
5.mahr relative strength.
The moving average is the average of the form of the change in the prices calculated on the number of days, the moving average facilitate guess market trends as it eliminates or reduces the hype statistical everyday, so it’s a shared machine through technical analysis and are used or in isolation and separately and either escort indicators fluctuating.
Moving averages are made up of many types, but we’ll deal with these two types, namely: the exponential moving average SMA.
1. Simple Moving Average
- – Definition: is the arithmetic average of the data and price data which is calculated for each brief break through in price value and then divided by the number of periods covered by the moving average. For example: When you increase the closing price of a currency for 25 days and then divide into by 25 we will get the moving average for a period of 25 days.Although the daily price for the closure is the most widespread use in the measurement of simple moving averages, but he can also rely on the average level for the medium term or the daily average of the highest level and the lowest level for one day with the inclusion of the closing price.
– Features: The moving average is similar machine which shows in which the main trend of the market. It serves as one of the most important means of measuring the strength of a long-term trend is also likely to be a reversal in prices. When the moving average is going towards the top and be the exchange rate at the time higher than the average, this indicates that the direction is safe since it towards the top and vice versa, as when it is moving towards the bottom in a moving Mtsut although the price will be lower than this indicates that the trend downward and low.
– Cons: The negative thing is that it averages the leader of the markets, but subordinate to it, as it signals the grant after the emergence of the modern movement or direction when you start talk and nothing before that. In addition to the possibility of granting a late signals causing a disability to enter the traders in the markets. This average was criticism because it gives equal weight to each interval, as some analysts believe that if the weight or the average duration increased more it shows the price movements more.
– Example: we see in the graph follows two means two moving averages of mobile type simple one for 5 days and appear red and last for 20 days and shows blue.
– Definition: the exponential moving average is the average of the potential for data and data prices, which have a great impact and a huge market at a certain point.
– Features: It is possible to apply to the price, which is based on a certain period of the moving average as whenever the duration of the moving average processing less the larger the future movement more forthcoming amendment.
We can identify this moving average through two ways: by the percentage built on the origin of the exponential moving average, which can be analysts watching the proportion of momentum in the markets for the last time, and other means which is which is determined by the length of time based on the moving average, which is secured timing What the two shops to see momentum in the markets for the next period. The momentum of the trading account is in each period, according to a specific formula.
– Basic characteristics compared to simple moving average: The EMA provides data and information on the momentum during the previous period Statistics, Moreover, he believes traders a quick sign of more to be able to deal with sudden fluctuations and rapid movements of the market. Unlike simple moving average, the last All prices in data and data basket is used to calculate the moving average, while the effect of reducing the long points of data and data with time but it will not go away once and for all.
– Example: Follow through the next chart you can see the difference between simple moving average that is shown in blue and the exponential moving average, which appears in green for approximately 20 days.
– Convergence and divergence moving average
Also called MACD indicator is used to locate and identify trends in the markets while momentum.
We calculate the MACD index by subtracting the longest period of exponential moving average of the exponential moving average for the period of Luxor. The most prevalent in the levels of this indicator is 12 days and also for the 26 day exponential moving average. According to this difference we moving average calculated for a period of nine days, which is called the signal line.
= MACD (moving average for a period of 12 days – a moving average for a period of 26 days) >> exponential momentum index
Signal Line = Moving Average (MACD) >> Average index exponential momentum
The MACD faster to continue the recent moves in the price of the signal line according to the homogeneity that gets the average exponential, so when we observe the intersection of the MACD signal line, the fastest moving average, which is a 12-day be at the top of the moving average slow level, which is a 26 day, which It means in principle that they signal the rise of prices, which give us the possibility of the rise of prices in the following period, with the momentum of the market. But this may be different when we note that the MACD below the signal line level indicator because it means that it is likely to proceed at a future price drop or change the current trend.
An example of MACD indicator
The following diagram shows you an example of MACD and through which the cursor appears in green while the signal line we see visible blue.
– Bollinger lines
Bollinger points were discovered by John Bollinger in the beginning of the year 1980, which is used to locate and identify and guess highest and lowest level of the price movements. Bollinger has identified the mechanism by trading in a specific area and is heading off the lines, which is based on the principle of artificial spaces through trading on the price movement. Higher trading period offers Bollinger lines to expand to give more space and when trading bearish Bollinger lines is due to shrink and remain in the neutral position of prices.
The Bollinger lines composed of three turns, which are drawn using harmonies with Price:
As the average line represents the dimension and the trend in the medium level (simple moving average for 20 days) is used for this goal permanently. While the upper line of Bollinger lines is a middle line for the same lines, but it isolates the change by 2 Standart turning toward the top and is a form of measurement values change to show how the prices turn of the amount and direction of the real and driven. But the bottom line of the Bollinger of Bollinger is also average, but isolates the change by 2 Standart turning downward adjustment so as to fluctuations and movements in fuel and accuracy. And this shows our Bollinger Band, which shows us the price in the market area, a standard relative to display the Bollinger Band and% of the field and set the final price of the Bollinger which is likely to reach him.
Bollinger upper SMA = +2 standard deviation.
Bollinger bottom = SMA – 2 standard deviation.
Bollinger average = simple moving average for 20 days.
Whenever channel shrunk and narrowed Bollinger lines, this increases the possibility of a clear vision and a great break and a series of twists and turns and moves in the markets. When the price of a commodity will continue what Bmsas the upper line of Bollinger This indicates that the prices of saturated acquisitions, which are likely to give a sell signal function. The reverse is also true, as when the price of a commodity will continue Bmsas bottom line of the Bollinger This indicates that the prices of saturated sell-off, which is likely to give a buy signal function.
– Example of the Bollinger Band indicator
You can see Bollinger Band indicator through the following chart of the S & P 500 and the US that appears in green.
– Parity system, LV reflection
Parity system, cessation and reversal of the most important and most powerful systems that are used by traders and investors say that the compensation for the shortening and the weakness of other indicators. I’ve been discovering these systems by Wales Wilder.
This system is based on the expense of moving stops the series of continuous decline in the markets, as the points shown on the Fee chart tracks the movements of price fluctuations and thus give Endowment signals and that are likely to indicate the landing end and change the movement towards the top again.
When the index continues to track the price and move with him, this would indicate a buy signal, and when the special points are above the price index, this indicates a sell signal. As for the stop loss points they show moving endowment, which advises prices that are likely to stop rolling the loss in his deal. While a series of ups exist in the markets we operate Endowment for the mobile machine to move the daily GMT with the price even reach the level of reflex in the markets and this level up to stop the deal on profit currently. While when a series of landing exist in the market, we also use cessation of moving machine, which will track the price whenever decline to show up and explain the expected levels of suspensions on a daily basis and also even the appearance of price changes up to this machine breakpoint.
The approach Endowment move of the most effective indicators that are used to periods of trading, as it rolling cooperation to take advantage of trading opportunities since its inception, and if the new trend for the markets failed to even succeed then it will change endowment index on the other hand automatically and rapidly than referring happen to cessation and reversal, which shows that rolling stop the current deal or that it will begin a new deal, the opposite of the current deal.
Example of the parity system, cessation and reversal
Below we show you a chart and see that through mobile cessation and reversal of the pair dollar / yen index.
The RSI is the granting of signals to buy and sell in the event of a difference and changing markets, it has been RSI discovery by Wales Wilder.
Based Relative Strength Index on the difference between the average of the daily close price towards the top contrast to the average of the daily close price towards the bottom, because it operates over approximately 14 days so as to convert these data to as much as hesitate between levels of 0 to 100. when the more average the average decrease or loss will escalate the index towards the top, but when the average decline higher than the average rise The index will fall.
Using the relative strength of the system to install the expiration of the series trend, which currently occurred, as it proves the presence of fluctuations and movements towards the top in the market when the RSI is above the 50 level and in the fall when the index below 50. Moreover he give indications if the saturated markets from sales or purchases by tracking the level of 30 and 70, which indicate the presence of a future reflection.
In the case of saturation from operations of purchase, the relative strength index is up nearly 70 which indicates that the currency or the goods have the saturation of the purchase operations and there is no presence of any buying in the market and thus it is expected that the market is due machine fell renewed because those who They turned out to purchase in the past they will close their positions to lock in gains. While in the case of saturation of sales when the cursor is located below the level of 30, it goes against fully saturate purchases.
We can see by the accompanying graph below RSI for the pair GBP / USD