Brandon Wendell, CMT
Brandon Wendell
Continuing on my article from a few weeks ago, I wanted to show more examples of how moving averages can assist you in trading decisions. As a successful trader and former graduate of Online Trading Academy, I also value price above any other indicator. But I do use some indicators such as moving averages (MA) in order to improve my chances for success.
Using the averages can allow you to see if prices are too high or low on a relative basis. I mentioned that price is elastic. It will stretch away from the average and then snap back to it. This can be extremely useful as an odds enhancer.
When price is approaching a demand zone in an uptrend, the highest probable opportunity is to buy. If price is also bouncing from a moving average at the same time, then there is an increased chance for success as the MA will work as a bit of support.
Many traders struggle when the zone is wide, there may be a lot of risk in buying at the proximal line of that demand. Your entry could be far from your stop price. If there is a MA inside of the zone, you may be able to lower your risk and increase your probabilities buy buying on the touch of that average. Just do not try to buy a bounce of a moving average without a demand zone!
When you are in a long position, you would want to exit the trade at a supply zone. One thing to look for would be the location of price versus the MA when you are at supply. If price has accelerated away from the average, then there is a higher probability that the supply will hold as price will want to snap back to the MA.
Similar strategies will work for prices and moving averages in a downtrend. The important thing to remember is that price determines your entries and exits. Indicators such as moving averages simply serve to assist your trading decisions and should not dictate the decisions themselves.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD looks offered below 1.1900
EUR/USD keeps its bearish tone unchanged ahead of the opening bell in Asia, returning to the sub-1.1900 region following a firmer tone in the US Dollar. Indeed, the pair reverses two consecutive daily gains amid steady caution ahead of Wednesday’s key US Nonfarm Payrolls release.
GBP/USD slips back to daily lows near 1.3640
GBP/USD drops to daily lows near 1.3640 as sellers push harder and the Greenback extends its rebound in the latter part of Tuesday’s session. Looking ahead, the combination of key US releases, including NFP and CPI, alongside important UK data, should keep the pound firmly in focus over the coming days.
USD/JPY drops toward 155.00 as focus shifts to US data
USD/JPY meets fresh supply and inches closer toward 155.00 in the Asian session on Tuesday. The Japanese Yen holds the upper hand over the US Dollar after Japanese Prime Minister Sanae Takaichi led the ruling Liberal Democratic Party to a historic landslide win and on intervention talks. Traders brace for key US economic data that could offer more clues on the Federal Reserve's monetary policy.
Editors’ Picks
AUD/USD meets initial resistance around 0.7100
A decent rebound in the US Dollar is behind the AUD/USD’s daily pullback on Tuesday. In fact, the pair comes under modest downside pressure soon after hitting fresh yearly peaks in levels just shy of 0.7100 the figure on Monday. Moving forward, investors are expected to closely follow the release of Chinese inflation data on Wednesday.
EUR/USD looks offered below 1.1900
EUR/USD keeps its bearish tone unchanged ahead of the opening bell in Asia, returning to the sub-1.1900 region following a firmer tone in the US Dollar. Indeed, the pair reverses two consecutive daily gains amid steady caution ahead of Wednesday’s key US Nonfarm Payrolls release.
Gold the battle of wills continues with bulls not ready to give up
Gold remains on the defensive and approaches the key $5,000 region per troy ounce on Tuesday, giving back part of its recent two day. The precious metal’s pullback unfolds against a firmer tone in the US Dollar, declining US Treasury yields and steady caution ahead of upcoming key US data releases.
Bitcoin's downtrend caused by ETF redemptions and AI rotation: Wintermute
Bitcoin's (BTC) fall from grace since the October 10 leverage flush has been spearheaded by sustained ETF outflows and a rotation into the AI narrative, according to Wintermute.
Dollar drops and stocks rally: The week of reckoning for US economic data
Following a sizeable move lower in US technology Stocks last week, we have witnessed a meaningful recovery unfold. The USD Index is in a concerning position; the monthly price continues to hold the south channel support.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.