Binomo has many indicators in its offer. One of them is called the Simple Moving Average or SMA in short. It is a very basic tool which gives information about forecasted price direction. The SMA calculates closing prices over some time. It adds them and then divide by the number of periods in which it measured these prices.
Today I will present the basics of the Simple Moving Average.
How to add the Simple Moving Average to the chart on the Binomo platform
You must be logged in to your Binomo trading account. Decide what instrument you want to trade and set the chart for Japanese candlesticks. The SMA will also work with other types of the chart, but the thing is that the Japanese candlestick type is the most transparent one, particularly for trading with the SMA. Choose 1 minute as the period of the candles. This will allow you to open transactions that last 1 minute or more.
Now, click on the icon that represents the Chart preferences. You will find the Indicators tab there. The Moving Average should be on the list of indicators.
The next step is to choose the settings for your moving average. Select “Simple” as a type and the value of 10 as a period. You can also decide to change the colour of the SMA line according to your preferences. At the end hit Apply button and the SMA will be added to the price chart.
How to use the Simple Moving Average in trading on the Binomo platform
The picture below demonstrates the price chart with the SMA added to it. I will use this example to explain how to use the Simple Moving Average to get the best entry points.
When the SMA10 is moving below the candlesticks and cuts the bearish candle through, and then runs above the price bars, it forecasts the downtrend. This is the time you should open a transaction for a price decrease. Try to enter at the closing of the bearish candle cut by the SMA. With 1-minute period candles, keep the position open for 1 to 5 minutes.
When the SMA10 line is moving above the price bars and then cross a bullish candle and continues below the bars, you get information about the upcoming uptrend. Therefore, you should open the up trade. You can hold your position for around 1 to 5 minutes. The best entry point is right when the bullish candle that was crossed by the SMA line closes.
Advice for trading with the SMA on the Binomo platform
The Simple Moving Average is used to predict a reversal in the price direction. But this is an indicator from the lagging group of tools. It means that there is a small delay in the information received from the SMA. You can increase the accuracy of the signals by adding an extra indicator. It can be for example the RSI or the Parabolic SAR.
You should set the period of the SMA according to your preferences. The 10-minute period is a good choice if you like opening short-term transactions. Choose larger periods when you want to open long-term trades. Keep in mind, that when you increase the value of the SMA period, the delay in signals produced by the indicator increases as well.
You can successfully apply the Simple Moving Average to the markets with high volatility. And the situation in the market changes more rapidly when there are some news releases scheduled. In such a case, do not hesitate and use the SMA on your chart.
Trading with the SMA is not complicated. Head to your Binomo demo account and check how it works. I encourage you to share your experience in trading with the Simple Moving Average in the comments section below.
Best of luck!