Moving average calculations
One of the tools that illustrates the direction in which the price is heading is called a moving average. A trader can catch the momentum with it, confirm the trend or identify the support and resistance levels. It measures the average price during a certain period equal to the number of the candlesticks. Let’s say you take 5 candles into account. The moving average will calculate the sum of the closing prices of these 5 candles and then divide by five. When the indicator is moving to the next candle, identical measurements will be made for the last 5 candlesticks.
It is possible for a trader to create a line of the results with a more fluent direction of the chart. This will smoothen out price breaks by showing the actual trend.
When you increase the period, the sensitivity of the price will diminish. At the same time, the delay in the chart will grow. You can always adjust the period, according to your needs, in the settings window of the indicator.
Different moving averages on Binomo
Once you access moving averages on the Binomo platform, you will discover there are a few types available. Let’s look into them.
Simple moving average
The simple moving average, known as the SMA in short, expresses the average price data in a certain period.
Exponential moving average
Exponential moving average or the EMA has a smoothing effect as it puts more attention to the recent prices. The priority diminishes exponentially and is generally never exactly zero.
Weighted moving average
The weighted moving average or the WMA focuses mainly on the present asset’s price. That is why the graph is not very much dependent on dated prices. The priority of importance expands in a linear fashion.
There are also Triangular moving average, VIDYA and Welles Wilder. They are, however, less popular than the others. Still, it is good to know you have such a variety of moving averages on the Binomo platform.
Using moving averages in trading
Moving averages are used for identifying the trend. You can also predict a reversal of the trend with this indicator. The point where two moving averages cross each other is where you should expect a change in the trend. These two moving averages should have been set for different periods.
I remind you there is a free practice account on Binomo. Log into it and check all the moving averages without risking any money.
Best of luck!