Moving averages and Forex orders in Forex trading
Moving averages are commonly used technical indicators in Forex trading. The moving averages are helpful for tracking the pricing trend of a currency. Moving average gives you a simple view of the trend and gives you a direction to carry on your trade. Moving averages can be adjusted according to your trade. If you are doing trade on an hourly basis, you can set a moving average to get the average price over the past 10 hours.
Simple moving average (SMA) is a basic style of moving average in currency trading. It just tracks the price data and gives you direction according to the time period you select. Weighted moving average (WMA) puts focus on more recent price action. This is also known as an exponential moving average or EMA. You cannot find all solutions by using moving averages; they will only help you to determine the overall trend.
There are different types of Forex orders in Forex trading which you can use for your trades. These Forex orders control both, how you enter the market and how you exit the market. You can use a market order to open a trade or close a trade at the market price. Limit orders are those orders which are used to exit the online trading market in profit. Limit order will always be above the market price if you are going long and will be below the market price if you are going short. If the market price crosses the limit order, then the trade will be closed and the profit will be credited to your account.
Stop orders are also known as exit orders and will close your trade. Basically, this order protects you from heavy loss. A stop loss order will close your trade at a particular level and is also used to lock in gains when your trade progresses into profit. Entry orders are used to enter the Forex trading market at a particular price. It is not possible to monitor the currency exchange market continuously and hence an entry order can be very helpful for entering the market. Sometimes market may break through a price which it has been touching but is not able to break. In such a case, use of entry limit orders is beneficial. Once the price crosses the entry limit order, you are in the foreign exchange market.
Every order has its advantages and disadvantages. The advantage is that it helps you to enter the market when you are away. The disadvantage is that when the market touches the entry order and your trade goes in the negative direction before you evaluate the move of the market. Different type of Forex orders are useful but study them carefully and try them on a demo trading account before using on real account.
Disadvantages of Using Moving Average Indicator for Forex Trading :
- Moving Averages are delayed signal
- High Risk = Using low time frame candle moving average / less no of candles considered for MA
- Low Risk = Using high time frame candle moving average / high no of candles considered for MA
- High Risk – lot of uncertainty
- Low Risk – Risk is minimized but overall profit is very low
- Using Moving Average or EMA you can not define exact place of Stop Loss , Target & Entry
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