Identify Trends Using Moving Average and Trade accordinglyMoving Average (MA) is a widely used technical indicator that smooth's out price trends by filtering out the “noise” from random short-term price fluctuations. The most common applications of moving averages are to identify trend direction and to determine support and resistance levels.
When asset prices cross over their moving averages, it may generate a trading signal for technical traders.
(In this chart when red line makes a cross over the green line on the Upside a Buy signal is generated, similar when the red line makes a cross over the green line to the Downside a Sell signal is generated)
Moving Average Length:
Common moving average lengths are 10, 20, 50, 100 and 200. These lengths can be applied to any chart time frame (one minute, daily, weekly, etc.), depending on the trader's time horizon.
Here in this chart I have used (9,21) length to identify short term trend.
Now, lets talk about how to prevent our self from taking trade on false cross over
(Here in this chart what i observed is-MA tends to provide more accurate signals when the cross over happen in either upward or downward direction, while a flat crossover as spotted within the circle gave a false move and an indication of a sideways trend
please do like, share and comment if you have any suggestion for me
Thanks
