Course Content
Introduction to Forex Market
Start with the basics; what is the forex market, who are the key players, learn about market structure and size, what are the advantages of forex trading, and why you should trade forex. Learn how to setup a free practice account so you can try everything you learn.
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Basic Terminology
Learn the basic terminology used while trading forex. Get familiar with basic terms such as currency pairs, types of orders, pips, spreads, margins, and leverage.
0/2
Synchronize Time and Place for Forex Trading
Delve into what is traded in the forex market, major currency pairs, cross currencies, and exotic pairs. Find out when the forex market is the most active and how money is made from trading.
0/2
Get Equipped for Forex Trading
Familiarize yourself with the basic tools needed to successfully trade forex. Learn how to analyze charts, trend lines, and time-frames. Discover what trading strategies are at your disposal, such as; scalping, day trading, long vs. short trading, swing trading, and many more.
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Fundamental Forex Trading Strategies
Discover the factors that most commonly influence the market and what impact they can have on your trading decisions. Learn how and when to use fundamental analysis, and the importance of a good economic calendar which details upcoming economic events.
0/3
Technical Forex Trading Strategies
Learn how to use technical analysis to evaluate the market and acquire a better understanding of the most popular trading strategies. You’ll learn about price action, support and resistance levels, chart patterns, and the importance of technical analysis.
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Fibonacci Technical Indicator
The Fibonacci Indicator is one of the most commonly used indicators. Receive an in-depth explanation of what the Fibonacci indicator is and how to use it when trading. Start creating your personal trader's toolbox.
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More Technical Trading Indicators
A profitable trader has many tools at his disposal. Learn about the essential tools used by traders such as; Moving Averages (MA), Relative Strength Index (RSI), Stochastic, Bollinger Bands, Parabolic SAR, ADX, and Pivot Points.
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Killer Combinations for Trading Strategies
The key to using forex indicators is to which to use together. Learn more about the Elliott Wave prediction pattern, divergence trading, carry trading, currency correlation strategies, and retracement/reversal strategies. Learn which indicators to use together for the best results.
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Forex in Relation to Stocks and Commodities and Trading with MetaTrader
Learn about the inter-relationship between stocks, commodities, and indices to the forex market. Take your first steps and learn how to master the MetaTrader trading platform.
0/3
Forex Trading Course
About Lesson

Moving Averages

Prices shift many times during each session. A standard trend can be unexpected, volatile and full of changes. Moving averages are intended to put order into prices. A moving average is the average of pair’s closing prices over a period of timeframes (a single bar or candle can represent different timeframes, for example- 5 minutes, 1 hour, 4 hours, and so on. But you already know that…). Traders can choose the timeframe and the number of candlesticks they want to examine using this tool. Averages are fantastic for getting a sense of the general direction of market price, analyzing a pair’s behavior and predicting future trends, especially when using another indicator at the same time. The smoother an average price (without significant ups and downs), the slower its reaction to market changes will be. There are two main types of moving averages:

  1. Simple Moving Average (SMA): By connecting all closing points you get the SMA. This calculates the average price of all closing points within a chosen timeframe. Due to its nature, it indicates a near future trend by reacting a little late (because it is an average, and that is how an average behaves).

The problem is that radical, one-time events that took place within the tested timeframe have a major impact on SMA (in general, radical numbers have a larger impact on an average than moderate numbers), which might give the wrong impression of an incorrect trend. Example: Three SMA lines are presented in the chart below. Each candle represents 60 minutes. The blue SMA is an average of 5 consecutive closing prices (go 5 bars back and calculate their closing price averages). The pink SMA is an average of 30 consecutive prices, and the yellow is an average of 60 consecutive closing prices. You will notice a very logical tendency in the chart: as the number of candlesticks increases, the SMA  becomes smoother, while it responds more slowly to market changes (more distant from the real-time price. Simple moving average example When an SMA line cuts a Price line, we can predict with relatively high probability a coming change in the trend’s direction. When the price cuts the average from below upwards, we are getting a buying signal, and vice versa. An example of moving average of a forex chart: Example of a moving average on a forex chart Let’s take a look at another example: Pay attention to the cutting points of the price line and SMA line, and especially to what happens to the trend right afterwards. cutting points of the price line Tip: The best way to use this SMA is to combine two or three SMA lines. By following their cutting points you can determine expected future trends. It increases our confidence in shifting the trend direction – as all the moving averages are broken, like in the following chart: Moving average are broken

  1. Exponential Moving Averages (EMA): Similar to SMA, except for one thing – The Exponential Moving Average gives greater weight to the last timeframes, or in other words, to the closest candlesticks to the current time. If you look at the next chart, you will be able to notice the gaps created between the EMA, SMA and the price:

Exponential Moving Average example Remember: While EMA is more effective in the short term (responds quickly to the price’s behavior and helps to spot a trend early on), SMA is more effective in the longer term. It is less sensitive. On the one hand it is more solid, and on the other hand it responds more slowly. In conclusion:

  SMA EMA
PROS Disregards most Fakeouts by displaying smooth charts Quickly responds to the market. More alert to price shifts
CONS Slow reactions. May cause late selling and buying signals More exposed to Fakeouts. Can cause misleading signals

If the price line stays above the moving average line – the trend is an uptrend, and vice versa. Important: Pay attention! This method does not work every single time! When the trend reverses, you are advised to wait for 2-3 candlesticks (or bars) to appear after the current cutting point, in order to be sure that reversal has been completed! It is always recommended to set a Stop Loss strategy (which you are about to study in the next lesson) to prevent unwelcome surprises. Example: Notice the excellent usage of EMA as a resistance level in the next chart (SMA can also be used as a support/resistance level, but we prefer using EMA): Moving Average as a support line Now, let’s examine the usage of two EMA lines (two timeframes) as support levels: Two EMA lines as support levels When candles hit the inner zone between the two lines and turn back – that’s where we will execute a Buy/Sell order! In that case – Buy. One more example: The red line is a 20′ SMA. The blue line is a 50′ SMA. Pay attention to what happens each time there is an intersection – the price moves in the same direction as the red line (shorter term!): EMA as support levels Important: Averages can be breached, exactly like support and resistance levels: Break of moving averages To sum up, SMA and EMA are fantastic indicators. We strongly recommend you practice them well and use them when actually trading.

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