Saturday, May 28, 2022

How Important is Moving Average Indicator in MetaTrader 5


MetaTrader 5 is strictly competing with its predecessor, the MetaTrader 4. It seems like MT4 was loved by the public so much that it remains to be the favorite of Forex traders even though it has been in the market for quite a while.

MetaQuotes formally released the MT5 in the market in 2010. There are a couple of advantages that MT5 has to offer. This includes the freedom in navigating the financial market including stocks, futures, CFDs, and Forex. MT5 is also available for mobile trading since it can be downloaded on iOS and Android devices. Because of this feature, traders can still have a life outside trading and even trade on the go with their devices.

There are also useful indicators in MetaTrader 5 and one of these is the Moving Average Indicator which is available for both MT4 and MT5. These moving averages are mostly used together with time-series data to regulate the fluctuations as well as highlight the longer trends and cycles. Moving average is commonly utilized for technical analysis of trading volumes, stock prices, and financial data.

The Moving Average Indicator (MA)

This is a simple to use indicator but works great in smoothing out the price data allowing to have a constant update with the average price. It takes about 10 days, 30 weeks, 20 minutes, or another time period that the trader chooses for the average to take over. There are pros in using moving average and there are also options as to the type of moving average that must be used. There are also strategies used in moving averages that are quite popular in the industry as they can be tailored according to the trader’s preferred time frame, suitable for both experienced traders and newbies.

Types of Moving Average

  • Simple Moving Average
  • Cumulative Moving Average
  • Light Weighted Moving Average
  • Exponential Moving Average

Trading Strategies for MT5 – The Crossovers

One of the most commonly used strategies in moving average is Crossovers. Its first type is the price crossover that happens when the price crosses below or above the moving average into a signal that can potentially change a trend. Another strategy in MT5 is the application of two moving averages into a chart – one is shorter and the other one is longer.

Why Utilize the Moving Average

Moving Average is very important in trading because it cuts down the ‘noise’ in the price market. It also acts as resistance or support. During an uptrend, either 50, 100, or 200 days, the moving average then plays as a support level. The moving average here is like a floor that allows the prices to bounce back. Meanwhile, during a downtrend, the moving resistance plays as a resistance or ‘a ceiling’ that whenever the price hits a level, it goes down again. But then, it is important to know that the price won’t respect the moving average at all times. There are instances in which the price simply runs through it or stops and takes the reverse route right before reaching the moving average.

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