6. Moving Average

MA himself is an indicator of a trend, i.e. the indicators used to determine the trend is happening in the market. Its use is extensive not only in the world of forex, if you never played the stock and using technical analysis, then sure MA is also used there. TOH is indeed technical analysis is universal and can be used in the sfemua market which uses the collective data.

MA also can be lowered again became the new indicator and completely different from the original indicator. The next time you start to learn the MACD (Moving Average Convergence Divergence) then you will know that one indicator was originally also from MA (just look at his name)
The moving average has three different variants, namely Simple Moving Average, Exponential Weighted Moving Average and the Moving Average. Each is a method of moving average, it's just a way of me-the average ratakannya that are different from each other. But in reading remains the same and it all soon followed, the rules applicable to the Moving Average. In fact since the early 2000 's, the Moving Average is not only developed in 3 variants, but being more than 5 variants tailored to its purpose only. But to narrow the space of discussion at once makes it easy for you in menginterprestasikan MA, the discussion only focused on these three types of MA.

Simple Moving Average (SMA)

Simple Moving Average (or commonly called Moving Average only or also abbreviated SMA) is the most simple Moving averages and weighted in the calculation does not use the movement against the closing price.

Note the picture of Simple Moving Average with the period 10 the following:

 

Though simple, effective enough in HIGH SCHOOL to determine the trend is happening in the market. Any way simple transcription.

Generally MA can be used for the following:

specify the trend
will happen. Determine support and resistance
. Smooth the other indicators are too jagged.

MA applications most widely used to predict the direction of the trend while the usefulness of the No. 2 and 3 not too widely used. This time the usefulness of the MA will emphasis focused on its usefulness to predict the trend. Whereas the usefulness of the No. 2 will be discussed in its own article will be inserted later.

Well, what if we use two HIGH SCHOOL with two different periods? The results will be very interesting. We'll soon know how the results:

 

Easier isn't it? With the use of two HIGH SCHOOL with two different periods we can more accurately predict where prices will again move. In the intersection between the price has occurred with both HIGH SCHOOL it will be ascertained the price right turned direction. In the image above, if MA with smaller period – i.e. period 10 if in the pictures below from the larger at MA-in the image represented by the period 15-then it is an indication of the price of being in the trend is down and vice versa when the period is smaller on top of a larger period then the trend of the currency rise was in

. Can we noted also that in the range between the two HIGH SCHOOLS getting bigger then it is likely the trend will continue and when a moment of a narrowing of the distance between them and until the intersection occurs again, it could be inferred that the boom is over. Easy isn't it?
About the MA period used, unfortunately until now there has not been a proper period search rules to wear. Indeed need a lot-a lot of practicing and trying (trial and error). You need to take note that the use of the period can vary according to the needs of the same pair though because it is the condition of a currency is a dynamic of time kewaktu. But based on experience, it is recommended not to use periods greater than 40. This meant a MA in order not to lose the deciding trend indicator sensitivitasnya as

. The greater period of MA MA resulting curve then will be more wide and insensitive in accommodating changes in prices. Conversely, the smaller the curve then MA MA period generated an increasingly growing sensitive. In this case too sensitive or not sensitive at all is not a good thing. The more sensitive a curve MA then more frequently false signals generated and make our trading loss. On the contrary, the more insensitive then signals to buy or sell into the less resulted in we can't trade.

Weighted Moving Average (WMA)

the first question that arises in the mind of the US is what is the difference FROM HIGH SCHOOL with WMA? Of course there are differences. Quite different that are classified into two parts. Not enough different that their names are similar because it uses the same methodology, only a different way

. Imagine this: which price has greater emphasis on weight in predicting the price front, the price of the last hour we have or the price two months ago we have? Of course that last one hour. At least the price movement is not the last hour will be more representative in predicting price before price when compared with two months ago.

Or if one is applicable to everyday life, take we're going to buy a cell phone. Of course we are going to find out the price of the mobile phone in the span of last time. Well, maybe we will pay more attention to the price of a day ago compared the price two weeks ago because according to save money we must have price movement will not vary much with price one week ago.

Weighting of assessment this is regulated by the WMA. In high school, the weighting of each good price two weeks ago or two days ago have the same scoring weight. On the WMA data last has a greater weight in value compared to the previous prices.

Weighting values in the WMA will depend on the length of the period that we set. Increasingly long periods assigned, then the greater weighting given to the latest data.

Exponential Moving Average (XMA).



XMA is the refinement of methods of high school. As we know that HIGH SCHOOL is the cause of the weighting resulting in the occurrence of the delay signal a change in trend. The awarding of the weights in the XMA just as well on a WMA, involving periods. It's just the difference if at the WMA is getting longer period that we use then the greater the weighted value of the last item, then on the contrary occurs i.e. XMA increasingly long periods we wear small then the last value weighting we wear.

SMA XMA, WMA, which is better?

Well this may be the last remaining question from the deliberations of the Moving Average. Where does this MA indicator variants among the most good?

Seen from the granting of a bullish or bearish signal indeed XMA is an indicator that can provide early signals than both. Of course because toh XMA indeed created for the mengeleminir kekekurangan variant of MA predecessor. But if the question is which is better, this becomes very relative depending on the wearer.

As a guide, the sensitifnya an indicator will indeed be very helpful to predict prices. But on the contrary, the more sensitive it will be more and more also false signal generated which means it could be the signal that was given was wrong or did not last long. That's why the return depends on the trader

. If you are a preferred game is more "safe", perhaps HIGH SCHOOL became more suitable than other variants. And vice versa if you like games that are more at risk (which also tells us the possibility of gain keunutungan will be as great as the risks that might happen) then the XMA would be better according to You because it is more responsive and faster in the giving of a signal. If you are an adherent of the "central axis", please use the WMA. A clear indicator is only an instrument, we who determine decisions based on hints the instrument

. In fact if done through the calculation of Mean Absolute Percentage Error (MAPE), XMA will give a smaller error than the other. But still it does not mean absolute XMA is the best. I deliberately did not include calculations with the MAPE because indeed very relative.

We will meet at the next chapter for the calculation by using other indicators. Until the news conference.