Forex Tools
What is Forex Tools.
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In order to start spread your money into forex market, you need a tool to trade. The most common tools widely used around the world is MetaTrader 4. Every broker have their own server for clients to trade. Its up to traders to choose what broker they want.
1
Register Live Forex Account
2
Download Forex Broker MetaTrader4
3
Install MetaTrader4
4
Enter Forex Account Number and Password
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Moving Average (MA)
MA is a smoothing device with the time lag. The MA is essentially a trend following device. Its purpose to identify signal that a new trend has begun or that an old trend has ended or reversed. It might be viewed as a curving trend line. It does not predict market action but follows it. Lets us calculate 3 days MA as below:
MA Time Periods
The critical element in a MA is the number of time periods used in calculating the average. The key is to find a MA that will be consistently profitable. The length of a MA should fit the market cycle you wish to follow:
Trend MA Length
Very Short Term 5 - 13 days
Short Term 14 - 25 days
Minor Intermediate 26 - 49 days
Intermidiate 50 - 100 days
Long Term 100 - 200 days
MA Entry
The use of single MA:
The Most popular method of interpreting a MA is to compare the relationship between a MA of the security's or currency's closing price and the security's or currncy's closing price itself.
. SELL Signal : When prices fall below the MA.
. BUY Signal : When the Prices rise above the MA.
Note: We don't BUY at the bottom or SELL at the top.
The use of Two MA:
The technique is called the 'Double Crossover Method'. For Example, the two popular combinations are 5 and 20 day averages and the 10 and 50 day averages.
. SELL Signal : When ther shorter average crosses above the longer.
. BUY Signal : When the shorter average crosses below the longer.
The Triple Crossover Method:
This brings us to the triple crossover method of using the three MAs instead of two. The most popular combination is 4 -9 - 18 days (or 5 - 10 - 20 days) MA combination. The 4 day will follow the trend most closely, followed by 9 day and then the 18 day. Abuying alert takes place in a downtrend when the 4 day crosses above both the 9 and the 18. A confirmed BUY Signal occurs when the 9 day then crosses above the 18.
Note: The MA we used up to now were Simple MA.
MA Types
. Simple (Arithmetic)
. Exponential
. Smoothed
. Weighted
. Triangular
. Variable
. Volume Adjusted
Note: The only significant difference between the varius types of MAs is the weight assigned to the most recent data.
Exponential MA (EMA)
Exponentially smoothed MA is calculated by adding the MA of a certain share of the current closing price to the previous value. Wtih exponentially smoothed MAs, the latest prices are of more value. P-percent exponential MA will look like this:
EMA = (Close (i) * P) + (EMA (i -1) * (100 -P)
where;
Close (i) - the price of the current period closure,
EMA (i-1) - EMA of the previous period closure,
P - the percentage of usig the price value.