Use this simple tool for trading the trend with CFDs

by , 22 September 2015

One of the simplest, yet effective, trading tools is the moving average. Many traders rely solely on moving averages for trading.

If you're looking for ways to trade with the trend using CFDs, moving averages are well worth considering.

So what are the benefits of using moving averages? And how can you use them?

Read on to find out more…


The benefit of using moving averages


It’s widely accepted that trading with the trend is one of the best ways to make money in the markets. This means you need to find a way to uncover market trends and trends in stocks you want to trade CFDs on.

This is where moving averages are a real benefit. They’re great at highlighting trends. And you can use them to pinpoint when a trend changes.

They work for both long and short trades.


How you can use moving averages when trading CFDs


Let’s look at how you can use moving averages when trading CFDs…

Say you use the 30-day moving average.

To calculate this, you divide the sum of the last 30 days’ closing prices by 30. You will no doubt be able to do this on the platform you use.

What you see on your chart looks like a trend line. It’s a smoothed out line compared to the ups and downs of a share price, explains Frank Hemsley in Profit Watch.

Take a look at the chart below. The green line is the 30 day moving average and the red line is the 100 day moving average…


Chart showing moving averages


Moving averages are like curving trend lines and help you to trade with the trend. And help you know when you can let your profits run.

By using two different moving averages together, you can get a better idea of what’s going on with the trend.

So there you have it. How to use this simple tool for trading the trend with CFDs.

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