Continuing our discussion regarding using moving averages to find the trend, what some traders do is that they plot a couple of moving averages on their charts instead of just ONE.
This gives them a clearer signal of whether the pair is trending up or down depending on the order of the moving averages.
Let me explain.
In an uptrend, the “faster” moving average should be above the “slower” moving average, and for a downtrend, vice versa.
For example, let’s say we have two MAs: the 10-period MA and the 20-period MA. On your chart, it would look like this:
Above is a daily chart of USD/JPY.
Throughout the uptrend, the 10 SMA is above the 20 SMA.
As you can see, you can use moving averages to help show whether a pair is trending up or down.
By combining this with your knowledge of trend lines you decide whether to go long or short a currency pair.
You can also try putting more than two moving averages on your chart.
Just as long as lines are in order (faster MA over slower MA in an uptrend, slower MA over faster MA in a downtrend), then you can tell whether the pair is in an uptrend or in a downtrend.
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