 Hi, in this video, I'm going to be talking about the moving averages and moving average indicators So and I'm going to be discussing what the moving averages are why they are used commonly used moving averages and how to plot Moving averages as well as these strategies Based of Brown moving averages so moving averages are used to try and determine trend and Momentum and is also considered Dynamic support and resistance. So we have horizontal Support and resistance which is covered in the previous video We've got diagonal support and resistance in the form of trend lines and trend channels, and this is what would be moving averages can be used as dynamic support and resistance and How the moving average works is by taking the average price of a certain period Before so price action Which tells traders what has happened in the past and may continue to happen in the future so What it does is like say for example This line here is the moving average and what it's doing. It's calculating past Price action and the average of a certain period because you can set the moving averages to certain periods So if you want to measure the last five, we're on a daily chart of the Euro British pound currency pair So if you set the moving average to five then it will measure the last five period moving averages So it lost five periods and does it in the calculation and displays them as the moving average so Basically the moving average is a lagging indicator, which means that it only again shows past price and It's calculating the measurement of past price in the average But it's not projecting into the future like say for example a you know, Fibonacci would for example It's not a predictive or it doesn't attempt to be predictive in nature. It's just telling you and giving you information What's happened over the past five ten twenty thirty periods in an attempt to measure either the trend or momentum so You have two different moving average calculations one is the simple moving average and one would be the Exponential moving average and they are they calculate the average differently to give slightly different results So right now we've displayed the simple moving average with the EMA or the exponential moving average Which is the blue line the calculations basically give more weight to the latest data and It reacts faster to recent price changes than the simple moving average both have their pros and cons But that basically that's the difference between the simple moving average and the exponential exponentials Basically react faster to price fast doesn't always mean better. So You have different types of moving averages, so Moving averages you have short-term medium-term and long-term now this depends Depending on what type of trader you are if you're a short-term trader and you know medium-term swing trader And invest the long-term trader you you will probably use different moving averages on your chart So the short-term moving averages will more look at Momentum in the momentum of the market a short-term momentum. Whereas medium and long-term Moving averages will look at the trend and long-term trends So the popular moving averages are the five period moving average Actually, in fact, let me just Let's see if I can write this down, right? So the five Period ma You've got these are the popular ones you've got the eight You've got the the ten You've got the twenty You've got the twenty one You have the fifty and you have the one hundred and 200 so those are the popular ma's moving averages that traders tend to use so for short-term Moving averages you would have these five and the eight and probably the ten Would be more of the short-term period moving averages the medium Moving averages or medium term moving averages would be the twenty and the twenty one period and more of a longer-term period moving average would be The fifty one hundred and 200 Moving averages so those would be the again depending on what type of trader you are You would plot, you know some of these one or two of these or even three or four of these So the first way traders use moving averages is Obviously to indicate the trend. So how would traders indicate a trend now What traders would do is Look at the longer term or medium to longer term moving averages So if you want to plot a moving average as an indicator, what you would do is you would go to indicators here and then you would look for moving average and Exponential just moving average as a simple moving average and then Click which one you want to use once you have it up on your chart You can go to Formats if you're using trading view and you've got inputs. So the input Changes depending on and this is what measures the past periods. So as we're using candlestick charts, it will use the past eight Periods of candlesticks. So if you're trading the daily, it will use the past eight days If you're trading 15-minute charts, it will trade the last 815-minute candles and You can basically plot as many moving averages as you want on the chart. So right now we have the Let's get these up. So we've got an eight Period moving averages is a simple period moving average and then we have the 20 We also have the 50 We have the 100 It's the 100 and we also have the 200 so These are your moving averages again short-term and long-term period moving averages But let's just focus on what we would consider to be the Way that traders find trends All right So what people what traders would do is they will look at the some of the medium term moving averages so that's Get rid of that like the 21 period moving average. So this is the 20 or the 20 period moving average and What they would do is they would say okay if prices above The 21 periods are you got a candlestick close? above the 21 period moving average, we could possibly be in an uptrend and all they would look for is by traits, right if Prices are below the 20 or 21 period moving averages Then they would look for sell opportunities So as you can see prices when prices go above You had this How many days did you have above this you had probably like one two three four five six seven quite a lot of days above so there were there was a lot of buying opportunities and Again once price when price closed below it you had you know quite a few weeks of A downtrend so that's how as one way traders will look to trade The moving averages now what another way that traders will use moving averages is They will add a moving average to the The moving average trend indicator now this would be used as a trigger so a Trade trigger so what they might do is actually use not the 50. I'd put it say the The small of a shorter term Moving average so what they would do is they would say okay We've got we want momentum and we want the trend on our side So they would have maybe an eight period moving average and then they would have the 21 period moving average And when price actually crosses so when the eight period moving average crosses the 21 period moving average That is a trigger to get long and then you have some crosses here Prices kind of crossed and then prices crossed over and crossed back and then we can see that Prices stayed there we can see across here and prices stayed there a Few crosses here and there So one right here So they would use the cross so the momentum the short-term momentum as well as the the trend the medium-term trend in order to enter and potentially exit trades So not only do you have? one Moving average as far as maybe the 20 or 21 or even the 50 or the 100 period moving average as your trend I suppose indicator and you would have your short-term momentum. So where's price? You know is there strong buying is there strong selling and that would be indicated by maybe the the five the eight or The ten period moving average. So you've got moving average crosses You've got when prices above the moving average. This is all confirmation as to which way you should be trading sometimes You know, you'll get choppy markets where prices will cross back and forth the market is never always in a trending State as we know so we've got across here cross there. So you'd have to really decide What what way you do want to trend also if you want to trade and If the market does obviously go in your direction, you could be in for some very very good trade the last way that traders trade moving averages is They will wait for price to come back into a level So they would use it as dynamic support and dynamic resistance now we can see Hear that once we were on the trend and we had a moving average cross Some aggressive traders Will look to enter Basically at the cross Move this out the way. So some will may may enter at the cross here, right? Maybe that's not the best tool to use Right, so here we go There's a cross right there So the eight and the 21 period moving average cross That's what they do now. There are some conservative traders who want a bit of confirmation so as prices are coming up what they would wait for is a Prices to touch the first touch of a moving average so prices cross to the upside they wait for the first touch of the moving average and Then they either get long via a pending order or some traders again will wait for Some confirmation and in this example we see an engulfing candle confirmation so This would be the can more conservative traders entry again Aggressive traders are getting in on the crosses conservative traders are waiting for a pullback and as you can see the 8 period moving average did actors support support support So it touched a few times Now we can see as well that the 21 period moving average the first time it was touched acted as support as well, so Just like support and resistance the more times a level is touched the weaker It becomes the same thing applies to Moving averages and the same rule applies to moving averages So we had the first touch of the move the 21 period moving average and then we have the You know cross back and forth a bit of a choppy market there and then we have a Cross here, so the first time it after price basically Crosses here it comes up actually acts as a bit of resistance price couldn't close above it again When prices come back to the 8 period moving average We have a bounce here bounce here bounce here, so it acts as resistance again We had first real major touch We had one here and then we had the second touch if you want to call that first touch or second touch But we didn't touch it for a while until here again couldn't close above it We've got a little spike here and then prices come across so again That's we've got a moving average cross to the upside the 8 period crosses the 21 period moving average We get a touch now prices Kind of spiked quite through it, but if we look at the 21 period average the price actually held so Again, it's just use of support and resistance by traders There are times where it may not work and times where it does again. We're dealing with probabilities here We can see that price here again acted as support support support Prices act to the support again, so There are other moving averages like the 50 period moving average that also act as support and resistance and Again the combination of moving averages will depend on what type of trader you are if you're more of a long-term trader Then you may probably more look towards the 20-21 period moving average crossing the 50 period moving average Or the 100 period moving average if you're a short-term trader You may want to just see the five period moving average across the 10 period moving average and develop your strategy around that but Again just to recap so that the three main ways that traders will use the Moving average is basically by let me just take these off quickly so Once price is above a certain Moving average some traders and a lot of traders will take that as a bullish or bearish Signal depending on which way you're looking to trade so it's above the moving average It's a bullish signal if it's below and it just breaks below the moving average It is a potential bearish signal second way that traders will trade moving averages is with the moving average cross as an Entry so they will combine to and possibly three moving averages a short term and the medium term So the short term which is measuring momentum and then we get The 21 period which is more of the trend so what they would do is as soon as price crosses They would then enter as the aggressive trader would a More conservative trader will wait for maybe some sort of pullback or price action to confirm their their entry and the third way that traders will use moving averages is as Dynamic support and resistance In conjunction with possibly You know horizontal or diagonal so let's see if there's any longer term Support and resistance here So this pink line here is the 200 period moving average and as you can see prices Came down to here. How many times has it been touched? As that the first bounce so traders definitely would have been watching this area here We have Right So we can see that if you were more of a longer term trader trading the 200 period moving average You have a long down trend here from probably from something like 2013 to 2015 a two-year down trend so You had the 100 and 200 you can see that the 100 was used as resistance here uses resistance resistance Uses a bit of resistance here Prices nearly came up to that 200 And again, it was used the 200 period moving average was used as Resistance along here. You can see the 100 there Kind of broke above it used as resistance here and again The moving average is also used as support as well, so I Hope that helps again. If you have any questions regarding moving averages just email me at info at trading 180 comm