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How to use moving averages to get in and out of forex trades profitably

by , 07 August 2015

Moving averages are a common forex indicator to use. They have a few uses.

You can use moving averages to identify the market trend. And you can use moving averages to show you when it's time to enter and exit a trade.

By using moving averages in conjunction with other forex indicators, you can increase the chances of getting your trades right.

So how can you use moving averages to enter and exit trades?

Read on to find out…


A combination of different moving averages yields the best results


When you trade forex, you get the best results by using a few different moving averages together. Using two or three different moving averages together should give you good results.

When selecting which moving averages to use, it’s a good idea to use ones of different intervals. In other words, use short-term, medium-term and long-term moving averages together.

You may find that certain moving averages work best for you. Some popular combinations are:

  • Four, nine and 18 days;
  • Five, 20 and 60 days; and
  • Seven, 21 and 90 days.

The important thing when selecting your moving averages is that they’re spaced far enough apart from one another so you generate significant signals.


Using moving averages to generate buy and sell signals


Say you decide to use two moving averages together.

When the shorter-term moving average crosses from below to above the longer-term moving average, this is a buy signal.

When the shorter-term moving average crosses from above to below the longer-term moving average, this is a sell signal.

You can see this on the chart below which uses five and 20 day moving averages…


Chart of moving averages


Points one and three mark buy signals, and point two marks a sell signal.

By experimenting with different moving averages on the currencies you trade, you’ll get a good idea of what will work best for you.

So there you have it. How to use moving averages to get in and out of forex trades profitably.

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