Why moving averages are important?

Why moving averages are important?
Can any explain...

they show the average price.

It gives you the feeling of what is the trend of the market.

They also can give you an idea of how far a pair my decline or accend. A lot of times a pair may have a tendency to lose strenght at certain moving averages.

This should help... on the left border of this thread is a search forum box. Type in "Moving Averages", and you will get 300 returns on the subject.

Good luck and many pips!

Hi all brothers

Can any body help me to specify the right moving averages (EMA SMA) for 15M, 30M, 1 H, 4 H, and 1 Day chart

Thx a lot

hi alhadi download this phillip nel's tpl
all the ma inside just check it out may be this can help you ....
MA set up base on the TF

rgds,
my30marahaba

First, its debatable whether moving averages have any value.

Second, every year is different for each pair, so the "best moving average" will be different from year to year.

Third, each timeframe suffers from the same randomness as stated in the previous sentence.


You'll find that over time, almost all technical analysis can be replaced by using your eyes. You don't need a moving average to show you a trend has been up or down recently.

alhadi, We have talked about this before here. The search function is a great way to find lots of info.
Which moving average is the 'right' one??
It doesn't work that way. If you want to use the more common ones, you could look at the 200 ema or sma. 55ema is quite popular, and so is 21 ema.

The thing is, one doesn't work better than the next, it has more to do with which ones YOU are used to looking at. Enjoy your homework.

I like to believe that I've tried absolutely everything with MA's. I find it to be an very inaccurate (doesn't necessity mean unprofitable) tool whereas the number you plot in rarely means anything ranging from 10-500. Sooner or later, price is bound to find s/r at any MA you might set.

Here's a picture with 3 random numbers; 123, 321 and 666 SMA. Looks great doesn't it

its called moving average for a reason...

no ... not to tell you the trend.... its moving average....get it?

They aren't.

From my understanding, some bigger institutional players use a 10EMA on a daily candlestick when it is trending, to establish good entry points.

You can gain good information about the market through various ways with MA's.
If you want to trade with them there only good for trending market, but u need to know when the market is gna trend or consolidate, unless ur mystic meg you wont know this.
The more experienced trader here will tell you that you dont really need MA's as you can gain information from the market without them. Probably true.

I have heard that the most commonly used indicator is the 200EMA. Not sure if that is a good thing or bad thing for people who use them. Generally, the masses don't do so well. The most common method I have heard MA's used for are crossovers, which has so many inherent flaws which have been discussed in detail for ages it is not worth going into (whip, saw, dust). I have heard some suggest that some MA's can provide support and resistance but I have not found pivots to occur on them much more than any other space on a chart.
Two methods that I have heard being used effectively is for breakout strategies following a reversion to the mean, and multiple time frame bias analysis.

The breakout strategy involves picking a moving average (the example that Rob Booker used in the video I watched was an 800SMA if my recollection serves me) that price tends to 'stick to' when price retraces back to it. When price has formed a clearly marked range at the MA, trade the breakout using solid money and trade management. He produced some (alleged) results from somebody who trades this method exclusively. The success% was not great but was outweighed by a good R:R, as one might expect from a breakout strategy and turned a decent profit. Whether the ranges existence upon a a moving average provided any significant improved results to an identical breakout strategy without the MA filter remains to be seen.

The multiple time frame bias method held a bit more interest for me. Simply the method (I think it was Peter Bain who explained the method) was to slap a moving average onto a chart, look at it from 3 different time frames, say 4H, 1H and 15m. If price is below MA on 4H and 1H (indicating a bearish bias on higher time frames), but above on 15m, then look for entry signals to get short in keeping with the higher time frame bias. Of course, the lower time frames will lead the higher time frames and reversals will look a lot like retracements. As a technique of filtering trades and an indication of bias and value this has some legs IMO but it is not a stand alone system.

If you're really interested in MAs, then you can find a FREE, profitable MA system, based on 50 & 100 crossover here: http://www.forexfactory.com/showthread.php?t=145135

I consider this respnse:

1)concise
2)to the point
3)accurate

Please consider closing this thread... we finally have a question asked on FF that has correctly answered in less than 1 page!

I'm sure someone has created an MTF MA indicator so that you can look at, for example, an M15 chart of the 200ema and simultaneously (on the same chart), look at the true 200ema value as it would be on an H1 and H4 chart. You wouldn't have to flip between charts.

However, have you noticed that an M15 200ema is about the same value as an H1 50ema? ( 200 * 15min/60min = 50). (Same is true for sma's). Look at the MA's on two charts and you'll see that they usually agree within a very small number of pips. Accuracy will depend on whether the PA has made any extreme moves or gaps that would throw off the two averages compared to each other, but usually they are very close to the same value, so long as you're considering a fairly large number of bars. I'm comfortable with MAs of 25 and higher. But if you expect a 5 MA on an H1 chart to be the same as a 20 MA on M15, the "5" is way too small a number and you will see significant differences.



Someone might take the position that "the 100 MA is my favorite on the M15, M30, H1 and H4". That position is virtually identical to watching the 50 MA as shown on the M30, and H1 charts, and... (note!), the 25MA on an H4 chart (because of the 4X time factor instead of 2X).

I have watched a 1500 MA on my M1 chart bounce to the pip after a huge move. Why that number? Because it happens to be similar in value to a 300 MA on M5, a 100 MA on M15, a 50 MA on M30, and a 25 MA on H1. Anyone see their favorite MA number/TF there?

At other times, it's a 1200 MA on M1... so what's that: That's like a 240 MA on M5, an 80 MA on M15, a 50 MA on M30, and -- what's most likely the "popular" MA among these numbers -- a 20 MA on H1. I think a "20ma" is the basis for bollinger bands (I didn't verify this statement). Either that or the 21 which is very close.

What's my point? First of all, it's a useful tip to recognize you can look at an MA on any TF chart and easily calculate what MA that would be approximately equivalent to on another TF chart. You divide or multiply the MA number by:

2X (between M15, M30, H1, H2, H4, H8)
3X (for M15/M5)
4X (for H4/H1 or H1/M15)
5X (for M5/M1 or Weekly/Daily)
6X (e.g. Daily/H4)


If you love the 50ema on H4, then I recommend that you keep watching that chart for the big picture and see it in context. But if you also like to watch the M15 chart, consider adding an 800ema (50 * 240min/15min = 800). It will give you approximately the same value as your H4 chart without taking your eyes off of the M15 chart.


Do I like MA's and use them? Yes. Very often price does respect the most common values (50, 100, 200, and some others) and on every timeframe. When it bounces to the tick, you know (after the fact) that the big players were paying attention. Do you know in advance??? Maybe in conjunction with other factors like Elliott Waves, trendlines, channels and fibo levels, perhaps you have a clue. Most of the time you won't know in advance... but if a long-term chart like the H4 makes a picture perfect or near bounce off the 50 (ema or sma) or the 100 (ema or sma), maybe you might join in for the fun of the retracement or reversal that just happened because the big players DO look at MAs. The proof is on the charts.

However, IMO if you look at a chart with only a single MA on it, I don't think you'll have a clue whether it will bounce or break when PA approaches it. This may well be the reason many people see no value in MAs because whether they break or not might appear to be random. I think that if you look at a cluster of comon MAs on one chart, and watch the separation between them and observe which of them bounced in recent past PA, you will have a clue as to whether to expect a bounce or break. The Guppy MA system comes to mind. You can never(!) be certain, but you can improve the probabilities of your guess and trade accordinly.

BTW, I don't have MA's all figured out but I have them on my charts and I do consider them worthy of further study.


Kent (pips4life)

P.S. Do you like the CCI indicator? It's based on the SMA, and when it bounces or crosses the "0" line, that's almost identical to PA crossing the period MA you are watching with CCI. For example, when CCI (50) crosses the 0-line, you will see that PA also just crossed the 50 SMA!

Also note that for the same reasons I gave above that, for example, a 50 SMA on an H4 chart is similar to a 200 SMA on an H1 chart, you can also see similarities between watching CCI(50) on an H4 vs. CCI(200 on an H1). They cross the CCI zero line at pretty much the same time.

I'm sure there are many possible MTF MA indicators, but here is a link to a thread with one that was posted 8 months ago.

http://www.forexfactory.com/showthread.php?t=78572

Try opening a M15 chart with a 200 SMA, and use the MTF indicator to display the 100 SMA from an M30 chart, and display the 50 SMA from an H1 chart. If my theory (based on my observations) holds true, all the values should be similar to each other. (Repeat using EMAs. Still true??)

I've attached some charts comparing the MTF vs a multiple MA on a lower chart.

On the GBPJPY, H4 chart, I happened to observe that PA during this major downturn since October has bounced repeatedly off of either the 90ema or 90sma. Why 90? I have no idea. However, my theory is that the 90 MA on an H4 chart is roughly the same as a 15 MA on a Daily chart (Keep in mind though that "15" is smaller than my ideal minimum of 25 which means I would expect some inaccuracy).

How do they compare? See for yourself... the Daily 15sma provides a pretty good bounce point, although be careful to note that the final value of the sma is based on the *Close* price, which during the bar hasn't happened yet. This can effect the actual value but usually not by much unless the bounce is absolutely huge within that bar.

My point would be that some people love the 15sma and if they watch it bounce on a Daily chart, this is about the same as watching a 90sma on an H4 chart. There are some differences of maybe 30 pips during the steepest part of the curve which is higher than would be my preference. While I might display it on the H4, I would want to have the Daily chart open as well to check it more explicitly (or, use the MTF MA indicator as shown).

I repeated this chart without the MTF so you can see the 90ema and 90sma lines more clearly. There are numerous nearly exact touches, but sometimes it is the sma and other times it is the ema. Is this a mere coincidence ?? I admit that I don't know in advance which will bounce but it merits further study.

Another example is attached. The H1 shows the 360 sma, and a MTF-H4-90sma. The two agree pretty well. If you zoom in to most areas, they agree within 2-3 pips except for the steepest part of the curve which I saw could vary as much as 15 pips. That illustrates that the two are just an approximation of each other, and not an exact equivalent.