Ideally, trade only when there is a strong overall directional bias to the price. Then, most traders only trade in that direction. If the price is in an uptrend, consider buying once the price approaches the middle-band MA and then starts to rally off of it. In a strong downtrend, consider shorting when the price approaches the middle-band and then starts to drop away from it. Once a short is taken, place a stop-loss one pip above the recent swing high that just formed.

Once a long trade is taken, place a stop-loss one pip below the swing low that just formed. Consider exiting when the price reaches the lower band on a short trade or the upper band on a long trade. Alternatively, set a target that is at least two times the risk. For example, if risking five pips, set a target 10 pips away from the entry.

The moving average ribbon can be used to create a basic forex trading strategy based on a slow transition of trend change. It can be utilized with a trend change in either direction up or down. The creation of the moving average ribbon was founded on the belief that more is better when it comes to plotting moving averages on a chart. The ribbon is formed by a series of eight to 15 exponential moving averages EMAs , varying from very short-term to long-term averages, all plotted on the same chart.

The resulting ribbon of averages is intended to provide an indication of both the trend direction and strength of the trend. A steeper angle of the moving averages — and greater separation between them, causing the ribbon to fan out or widen — indicates a strong trend. Traditional buy or sell signals for the moving average ribbon are the same type of crossover signals used with other moving average strategies.

Numerous crossovers are involved, so a trader must choose how many crossovers constitute a good trading signal. An alternate strategy can be used to provide low-risk trade entries with high-profit potential. The strategy outlined below aims to catch a decisive market breakout in either direction, which often occurs after a market has traded in a tight and narrow range for an extended period of time.

To use this strategy, consider the following steps:. The moving average convergence divergence MACD histogram shows the difference between two exponential moving averages EMA , a period EMA, and a period EMA.

Additionally, a nine-period EMA is plotted as an overlay on the histogram. The histogram shows positive or negative readings in relation to a zero line. While most often used in forex trading as a momentum indicator, the MACD can also be used to indicate market direction and trend.

There are various forex trading strategies that can be created using the MACD indicator. Here is an example. The Guppy multiple moving average GMMA is composed of two separate sets of exponential moving averages EMAs. The first set has EMAs for the prior three, five, eight, 10, 12 and 15 trading days. Daryl Guppy, the Australian trader and inventor of the GMMA, believed that this first set highlights the sentiment and direction of short-term traders.

A second set is made up of EMAs for the prior 30, 35, 40, 45, 50 and 60 days; if adjustments need to be made to compensate for the nature of a particular currency pair, it is the long-term EMAs that are changed.

This second set is supposed to show longer-term investor activity. If a short-term trend does not appear to be gaining any support from the longer-term averages, it may be a sign the longer-term trend is tiring out. Although the above combinations make for a valuable tool, holding on to gains in practice may prove harder than anticipated.

And that is because Forex trading, in general, is all about the market conditions one trades in and how one looks at the market.

Join our responsible trading community - Open your Orbex account now! Trading with the moving average is not as simple as many will tell you. This is especially true when using only one indicator to make trading decisions. It can be tricky, as the Forex markets constantly evolve due to their dynamic nature.

So, selecting the period of an MA is not as easy as just choosing a fixed period because everyone else does. However, and following this as a rule of thumb, one could use the 50 or a shorter-term moving average to ride a trend, or even identify the beginning of a new trend.

What do you do, though, when the market is ranging? A trend indicator is no longer good and markets also indicate that you should look for other Forex indicators that can provide more insightful trading signals not described here. Well, based on any moving average system, a serious FX trader or aspiring swing trader should always consider the following:.

For that reason, it is recommended that FX traders who do trade, or want to test out trading any moving average-based swing system, do so under the following market conditions:.

It can look tedious having to introduce some extra rules or indicators that add complexity to a simple SMA trading system for swing trading. However, the reality is that those rules are going to save you from many bad trades.

In addition, any forex trading system should really be based on rigorous backtesting , not just paper trading. After backtesting a total of 21 trading strategies based on a crossover between an SMA and the current price at the hourly candle close , I confirmed that swing trading with a moving average turned positive results only in trending markets.

The results indicated a huge number of losing trades when on a rangebound market and that was owed to the entry and exit methods. A buy signal was generated when the selected SMA crossed below the current price of EURUSD, a sell signal when the opposite occurred and a stop loss set at 20 pips -fixed. That can be easily changed to 15 or 30 or a more advanced money management system. But, in EURUSD, 20 pips made a relatively good value to compare trading strategies.

But since it's only a retracement and not part of the whole big trend, the price can get exhausted fast. If the price is losing momentum, it will show first in the short-term SMAs. This part can be a bit more subjective because traders can choose to exit the trade at different times. We would recommend exiting the trade based on the strength of the trend. You can wait for the moving averages to crossover once more, or you can make your own judgment on when to close the position. However, it's a big warning sign when the 4 SMA and the 9 SMA cross back over the 18 SMA.

In this case, you should exit the trade immediately to reduce potential losses. See Also: Trading Loss: How to Prevent It in 5 Ways. If the trend is strong, it would be best to exit the trade once the price moves in the opposite direction. Remember that a sharp push in either direction can be subject to retracements. Ideally, a stop loss should be placed close enough to minimize losses but also far enough so that it won't be activated too early in the game. This is important especially considering that the price might move in the opposite direction for a little while before moving back to the previous trend direction.

If you place the stop loss too close to your entry point, then it might get triggered before the price turns back. Another possible case is when the 4 SMA and 8 SMA cross over the period before a stop is triggered. If this happens, cut your losses immediately. We've learned from this article that moving average can be a remarkable technical indicator for swing trading if we know how to use it right.

Using this indicator, we can find great entry and exit signals for our trades and determine the strength of the overall trend. However, bear in mind that this trading plan is not the only one since there are plenty of other combinations out there that you can use in swing trading. To keep the risk low, it's best to combine this strategy with price action or other indicators to confirm the trading signals further.

Lastly, you should also note that, like any other trading plan, there is no guarantee that this strategy will always work out. Therefore, always do a backtest in a demo account and make sure that it fits your trading preferences. Passionate in contemporary global financial issues, I'm currently active in researching topics on cryptocurrency, forex, and trading strategies.

Losers get high from the action; the pros look for the best odds. I do nothing in the meantime. If intelligence were the key, there would be a lot more people making money trading.

If you don't bet, you can't win. If you lose all your chips, you can't bet. They are taking 5 to 10 percent risk, on a trade they should be taking 1 to 2 percent risk on. They are aware of trading psychology their own feelings and the mass psychology of the markets.

If you can follow these three rules, you may have a chance. The most important thing in making money is not letting your losses get out of hand. Not finding what you're looking for? Or go to one of our top sections if you need any suggestion.

Search Page Search Broker Broker Name Country Established Regulation Max Leverage Min Deposit Explore Brokers. Which Moving Average is Best for Swing Trading? The moving average is one of the technical indicators that is commonly used for swing trading.

But from the many types and periods of MA, which one is the best? Contents Using Moving Average for Swing Trading Moving Average Strategy for Swing Trading Placing an Entry Order Identifying the Exit Signal Stop Loss Settings Brief Summary.

More Articles on Trading Plan And Strategy. Forward Testing Your Trading Strategy to Success.

As a swing trader, you have an arsenal of technical indicators you can rely on to help you uncover opportunities and execute trades. However, among the most frequently used indicators are moving averages. From the SMA simple moving average to the EMA exponential moving average , to the MACD moving average convergence divergence — there are quite a few different moving averages you can rely on. Further complicating matters is the time frame for which each of these indicators can be looked at through.

All this variety can lead to analysis paralysis — as you ponder all the different indicators and end up stuck in your thoughts, failing to actually gain confidence in your decision-making. Keep in mind — each of these moving averages has its place in your arsenal. However, some are more insightful than others. We recently wrote a complete guide discussing the best swing trade indicators. There, we touched on moving averages in general and their variations. A moving average is simply a calculation that takes the average price of a security over a certain period of time — and then plots that data on a chart.

This gives you a good idea of the overall trend of a stock. There are different types of moving averages — as we briefly mentioned before.

The most common ones used in trading are the SMA simple moving average , EMA exponential moving average , and MACD moving average convergence divergence.

However, there are quite a few others worth mentioning as well. The SMA is the most basic type of moving average. An exponential moving average EMA puts more weight on recent price action than a simple moving average does. The formula for an EMA includes a multiplier, which essentially determines how much weight is given to the most recent price. A smooth moving average is simply an EMA that has had its multiplier reduced. This makes it less responsive to recent price changes than an EMA — but more responsive than a standard SMA.

A linear weighted moving average LWMA is similar to an EMA in that it gives more weight to recent price action. However, the way the LWMA calculates weighting is different. With an LWMA, the weight given to each closing price declines linearly — as opposed to exponentially like with EMAs. The MACD is a bit more complex than a simple moving average or EMA. MACD lines are plotted above and below a zero line, which signals bullish and bearish momentum, respectively.

Just as there are different types of moving averages, each of these can be broken down further by time frame. There are three main time frames to consider when swing trading: short-term, intermediate-term, and long-term. A short-term moving average is any MA that has a time frame of 20 days or less.

The most common MAs used in this time frame are the day, day, and day MAs. An intermediate-term moving average is any MA with a time frame of 21 days to days. The most popular MAs in this category are the day, day, and day MAs. A long-term moving average is an MA with a time frame of days or more. The most common ones used by traders are the day and day MAs. The best moving average for swing trading depends on your trading goals and risk tolerance.

That said, there are certain types of moving averages that tend to work better than others for swing trading. Another thing to keep in mind is the length of the moving average. A longer moving average will smooth out some of the noise and help you better identify the overall trend. For swing trading, in particular, most investors benefit from sticking with intermediate time frames — such as a day moving average. However, the day moving average is another great option. As we always say — the best way to learn is by actually trading.

Moving averages can be used in a few different ways when swing trading. The first way to use moving averages is to simply identify the overall trend. This is probably the most common way that MAs are used by traders. By plotting a MA on your chart, you can quickly see whether a stock is in an uptrend, downtrend, or sideways pattern. An uptrend occurs when the stock is making higher highs and higher lows. In other words, each successive peak and trough is higher than the last.

A downtrend is the opposite — with the stock making lower lows and lower highs. This could be an opportunity to buy the dip — as long as the MA holds as support. Conversely, if a stock in a downtrend starts to rally back up towards its MA, this could be a good time to sell or short the stock. The key here is to wait for confirmation before taking a trade.

Instead, look for candlestick patterns or other indicators that signal that the trend is still intact — even after the pullback. This will help you avoid false breakouts and increase your chances of success. Moving averages can also be used to help you exit your trades — either at a profit or a loss.

For instance, you could wait for the RSI indicator to become overbought or oversold before taking action. Or, you could look for candlestick patterns like bearish reversals or bullish reversals. Even using the best moving averages for swing trading can become time-consuming, complicated, and at times, inaccurate.

Fortunately, there is a better way to conduct analysis that requires no manual work on your end. Just sound investment principles that have been perfected over the course of the past decades. Sounds too good to be true? The VectorVest system boils down all fundamental and technical analyses into three proprietary ratings: Relative Value, Relative Safety, and Relative Timing.

These make up the VST value, safety, timing rating a stock is given. All of these ratings are easy to understand, ranked on a scale of 0. The closer to 2. And, this system provides investors with a clear buy, sell, or hold recommendation for any given stock.

Our system also grants investors insights into what market sentiment is at any given time. With prebuilt searches for the hottest stocks at any given time, finding your next opportunity is as straightforward as it gets. You can even take your investments on the go with our mobile stock advisory. Want to see it in action? Get your free stock analysis here! So, what are the best moving averages for swing trading? And while using moving averages can be beneficial, there is an easier, more straightforward way to trade.

What more could you ask for? If you want to learn swing trading more, find great resources in our blog — such as our articles on swing trading for beginners , swing trading pros and cons , or swing trading vs scalping. Save my name, email, and website in this browser for the next time I comment.

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Previous Next. View Larger Image. What Exactly are Moving Averages? The Different Moving Averages Explained There are different types of moving averages — as we briefly mentioned before. SMA Simple Moving Average The SMA is the most basic type of moving average. EMAs Exponential Moving Average An exponential moving average EMA puts more weight on recent price action than a simple moving average does. SMMA Smoothed Moving Average A smooth moving average is simply an EMA that has had its multiplier reduced.

LWMA Linear Weighted Moving Average A linear weighted moving average LWMA is similar to an EMA in that it gives more weight to recent price action. MACD Moving Average Convergence Divergence The MACD is a bit more complex than a simple moving average or EMA. How Time Frames Factor Into Moving Averages Just as there are different types of moving averages, each of these can be broken down further by time frame.

Short-Term Moving Averages A short-term moving average is any MA that has a time frame of 20 days or less. Intermediate-Term Moving Averages An intermediate-term moving average is any MA with a time frame of 21 days to days. Longer-Term Moving Averages A long-term moving average is an MA with a time frame of days or more.

So — What are the Best Moving Averages for Swing Trading? Identify the Overall Trend The first way to use moving averages is to simply identify the overall trend. Exit Your Trades Moving averages can also be used to help you exit your trades — either at a profit or a loss. Final Thoughts on the Best Moving Averages for Swing Trading So, what are the best moving averages for swing trading? Analyze Any Stock Free. OFFER INCLUDES. Ready to test-drive VectorVest?

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Even though the trading tool has been around for a long time, but it's still widely used today due to its simplicity and reliable signals. The best moving average for swing trading depends on your trading goals and risk tolerance. What do you do, though, when the market is ranging? The optimized MA period is the period of This part can be a bit more subjective because traders can choose to exit the trade at different times. The idea is to identify a changing trend and then ride the new trend for as long as possible until it eventually wears out.

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