Moving Average trading on the Forex
The moving average is one of the most popular tools used in trading. Every charting program allows for a moving average to be plotted on the chart. You can chart the price of the underlying currency pair you are trading or any one of the other indicators values that come with the software program.
A moving average is a set of numbers, each of which is the average of the corresponding subset of a larger set of data points. A moving average uses unequal weights for each data value in the subset to emphasize particular values in the subset.
A moving average is used to smooth out short-term fluctuations and highlight longer-term trends or cycles. The threshold between short-term and long-term depends on the application, and the parameters of the moving average will be set accordingly. Mathematically, a moving average is a type of convolution and so it is also similar to the low-pass filter used in signal processing.
Exponential moving average
EMA weights N=15An exponential moving average (EMA), sometimes also called an exponentially weighted moving average (EWMA), applies weighting factors which decrease exponentially. The weighting for each older data point decreases exponentially, giving much more importance to recent observations while still not discarding older observations entirely.
I use moving averages on every chart I look at. There are many different way of interpreting the price action when it is above or below the moving average.