So, basically, as is the case with any signal in technical analysis, the higher the timeframe the more significant the signal tends to be. What you will find is that the price will often respect these 3 moving averages, particularly on the daily but also on the weekly and monthly charts.Īlthough we said that their most famous implementation is on the daily chart, the weekly and monthly timeframes also give highly reliable trading signals. To use these moving averages as support and resistance you only need to look at them as any other support or resistance level (or area) on the chart. The 50-day, 100-day and 200-day moving averages as support and resistance The 50, 100 and 200 daily moving averages can be viewed as dynamic areas of support or resistance, but also a crossover between those moving averages has some significant implications for the asset or currency pair that you are analyzing. In contrast, they are rarely if ever used on intraday charts, thus the accuracy of any trading signals generated on lower timeframes is questionable.Consequently, you will often find them being referred to only as 50-day, 100-day and/or 200-day moving averages. Finally, a key aspect to keep in mind is that the 50, 100 and 200-period moving averages are most commonly used on the daily chart and therefore tend to be a more reliable trading signal on this timeframe.Here, like in many other areas of trading the markets, it all comes down to preferences and to what works best with your strategies. However, again, the 50-period moving average appears to be the more popular option among traders, although that doesn’t mean that it’s going to be the better option for everyone. Further, some traders prefer the 55-period moving average instead of the 50-period, mainly because the number 55 is part of the Fibonacci sequence.Of course, some traders like to use the weighted (WMA) or the exponential moving averages (EMA), but most of the time and most traders use the simple 50, 100 and 200-period moving averages on their charts. Generally, though, the most popular calculation for the 50, 100 and 200 period moving averages is the simple moving average (SMA). So, first of all, there are some different variations of these 3 moving averages that are commonly used.
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This is as important as knowing how to trade them and what the trading signals mean. Instead, in this post, we’ll only discuss the group of what are probably the 3 most important moving averages that a trader will ever need.īefore we get into the details on how to use the 50, 100 and 200-period moving averages, let’s start with some preliminaries regarding the contexts in which they are used. You can read more about that in the general article on moving averages here. Since a lot of traders are plotting the group of the 50, 100 and 200 moving averages on their charts, it only makes them a more reliable trading indicator.īut, we are not going to go into what are moving averages, how they are calculated or any basics of that kind in this article. Basically, the more people look at and trade by the same price level the more likely it is for that price to be important in some way (i.e. Considering that one of the basic rules of technical analysis is essentially a self-fulfilling prophecy, it’s no wonder that these 3 moving averages work so well in the Forex market.
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