Everyone knows indicators are used as a helping tool in the investment business. But if you take a look at the professional trader, you will notice that they have in-depth knowledge regarding the use of modern tools. If you intend to make a regular profit from this market, you must learn to use the tools like the pro traders. Though there are many techniques you need to learn the best method.
In this article, we are going to learn the most advanced use of the moving average. After going through this article, you should be able to take the trades systematically and make more profitable trades in the market.
Setting up the period
Setting up the period in the moving average is the most difficult task. Most novice traders trade with the lower period moving average as they prefer to trade the market in the lower time frame. Usually, the MA with 21 and 7 periods is used by the lower time frame trader. But if you intend to trade the market in a higher time frame, you should be able to trade the market with a higher period moving average. For instance, you may use the 100 periods moving average to execute the trades.
Finding the trend
Do you know that you can use the moving average to find the existing trend? Use the 100 periods moving average in the daily time frame and you can easily identify the existing trend. If the slope of the moving average is positive, look for the buying signal. On the contrary, if the slope of the moving average is negative, look for the selling signals. By using the slope of the moving average, you should be able to execute high-quality trades with a great level of precision. Without having strong analytical skills, you will never succeed in the retail trading industry. Those who are experienced in using the MAs, feel free to join here and learn more about the sophisticated use of moving average.
Identifying the reversal
With the help of the moving average, you can also identify the major reversals in the market. Identifying the key reversals in the stock market might seem a tough task but if you follow some fixed sets of rules, you should be able to do this in a very strategic way. For instance, if the price breaks below the 100 periods moving average, you may consider it as a downtrend. On the contrary, if the price of the asset breaks above the 100 periods moving average, you may consider it as an uptrend. Based on the existing trend, you should take your trades. But make sure you use the moving average in the daily time frame as it will give you a better overview of the market.
Scalping the market
Professional traders often scalp the market with the help of the moving average. They set pending orders at the moving average with a tight stop loss. Before you start scalping at the moving average, you should learn to use the market systematically. Try to evaluate the market data strategically and find the trade signals in the higher time frame. If possible use the price action confirmation signals to determine the position of the trade signals. At times you will get confused with such an approach but if you follow the core rules of money management, you should be able to make regular profit from this market.
Revise your trading strategy
If you develop a trading strategy based on the moving average, you should revise it once in a while. By revising the trading strategy, you should be able to make quick decisions at trading. At times, you might get confused and think the moving average is not working. This is the moment when you need to bring some positive change to your existing trading strategy. Once you modify your trading method, you need to back-test your trading performance. Though moving average provides profitable trade signals, still you will lose some trades. So, always trade with proper money management at trading.