Moving average

Moving Average

Moving Average

When analyzing price movements, moving average can be of extreme importance. Its main function is to help traders determine support and resistance levels by examining highs and lows of a candle, but it can also serve as a solid proof of the type of trend a price is experiencing. The main advantage of using this method to perform your analysis is that it’s extremely easy to notice on your chart. Everything is quite obvious right from the start, meaning that you don’t have to waste a lot of time and energy analyzing the data. That’s why most traders use it. We are here to show you how you can use the moving average too, so sit back and read on.

Moving Average | What can you get from it?

Moving average comes in a variety of shapes and sizes. You have, for example, MA200, MA100 and MA50, where the number denotes how many periods or candles are taken into consideration. Of course, these numbers are not fixed and the final choice is up to you, but these versions are the most popular among traders. Apart from them, you can also use Simple Moving Average where you just add up closing prices and divide their total value with the number of periods. Exponential Moving Average is pretty similar to the SMA, but it is more focused on the newest price movements. From this, you can imagine that Time plays a pretty significant role in using this tool, so let’s see how to use it in the best manner.

Moving Average | Learn to use it

You should be aware that, while they may provide you with very solid information regarding support and resistance levels, big moving averages are not reliable if you’re trading short term options and vice versa. In addition, be on the lookout for the situations when a shorter-term moving average crosses a longer-term one. These are called golden crosses or death crosses, depending on the direction of the market (bullish or bearish). This should be a signal to traders to react and start buying call or put options, and the signal is considered to be particularly strong if an MA50 reaches and crosses MA200. As you can see, moving average can help you in a lot of different ways: you can determine support and resistance levels, choose when to react and even analyze trends. Therefore, mastering it should be your priority.

Moving Average | Conclusion

Examining a moving average is one of the most popular techniques among binary options traders. You can really extract a lot of information that way and make an accurate prediction. Using it does require you to have a firm grip of the trading basics, however, but once you master it you will have a very powerful tool at your disposal. This is probably the best proof that investing some time in education will pay off in this business, so take a look around and see what else can be learned on our website.



1. The Four Pillars Of Investing: Lessons For Building A Winning Portfolio (W. Bernstein, 2002)
2. The Forex Options Course: A Self-Study Guide to Trading Currency Options (A Cofnas – 2008)
3. Market Wizards (J. D. Schwager, 1989)
4. The Alchemy Of Finance (G. Soros, 2007)
5. A Random Walk Down Wall Street (B. Malkiel, 1999)

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Author: Ben Prescott

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