The moving average (MA) indicator is one of the most used technical indicators for forex traders. It’s a formula used to calculate the averages of a market’s movements over a longer time period (usually weeks or months rather than days) to identify trends, which is vital for a good forex trading strategy.
Moving Average Envelopes Trading Strategy
Moving average envelopes are percentage-based envelopes set above and below a moving average. The type of moving average that is set as the basis for the envelopes does not matter, so forex traders can use either a simple, exponential or weighted MA.
Forex traders should test out different percentages, time intervals, and currency pairs to understand how they can best employ an envelope strategy. It is most common to see envelopes over 10- to 100-day periods and using "bands" that have a distance from the moving average of between 1-10% for daily charts.
Best indicator the moving average periods for day-trading
When you are a short-term day trader, you need a moving average that is fast and reacts to price changes immediately. That’s why it’s usually best for day-traders to stick with EMAs in the first place.
When it comes to the period and the length, there are usually 3 specific moving averages you should think about using:
9 or 10 period: Very popular and extremely fast-moving. Often used as a directional filter (more later)
21 period: Medium-term and the most accurate moving average. Good when it comes to riding trends
50 period: Long-term moving average and best suited for identifying the longer-term direction