Simple Moving Average

In this article we will examine, explain and apply the simple moving average and a 4-hour chart time, but you can use them successfully with other timeframes. Moving averages are one of the most popular ways and simple to use, as technical tools for the average investor.

The average of a regular series of data makes it easier to be able to identify trends, the channel , which is particularly useful in volatile markets. Moving averages are also a great starter for those who want to expand their knowledge of analytical techniques in any market. Taking your favorite Forex chart , setting the timeframe for 4 hours, moving averages can be applied in practice.

The simple moving average is formed by calculating the average price of a currency on a specified number of periods. When you introduce a variable for a simple calculation of the moving average, is always the closing price of what will be included in the calculation. For example, five-day simple moving average is calculated by adding the closing prices of the last 5 days and then dividing by 5.

The averages are then combined in order to create a line, known as the moving average line. Continuing our example, we must then add the following to the average closing price, removing the oldest in date order. As each day ends, a new day is added and the oldest data will be deleted.

Once the price breaks a moving average line, and depending on the type of time frame used, might indicate a change up or down.

Moving averages are therefore an easy to use, calculated in a mathematical way, in a very simple but it can give us a general idea of ​​the trend of the currency pair that has decided to follow.

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