Moving Average The Moving Average Technical Indicator shows the mean instrument price value for a certain period of time. When one calculates the moving average, forex sederhana averages out the instrument price for this time period.
As the price changes, its moving average either increases, or decreases. The only thing where moving averages of different types diverge considerably from each other, is when weight coefficients, which are assigned to the latest data, are different. In case we are talking of Simple Moving Average, all prices of the time period in question are equal in value. The most common way to interpreting the price moving average is to compare its dynamics to the price action.
When the instrument price rises above its moving average, a buy signal appears, if the price falls below its moving average, what we have is a sell signal. This trading system, which is based on the moving average, is not designed to provide entrance into the market right in its lowest point, and its exit right on the peak. It allows to act according to the following trend: to buy soon after the prices reach the bottom, and to sell soon after the prices have reached their peak. Moving averages may also be applied to indicators. That is where the interpretation of indicator moving averages is similar to the interpretation of price moving averages: if the indicator rises above its moving average, that means that the ascending indicator movement is likely to continue: if the indicator falls below its moving average, this means that it is likely to continue going downward. This value is then divided by the number of such periods. N — number of calculation periods.