Best Moving Average Settings for Daily Trading

Moving-average (MA) are traditional indicator that are commonly used by traders, both beginner traders as well as skilled and professional traders. Its usability and brilliant capacity to peruse (detect) long-term trends make the MA as the first known indicator of novice traders. There are numerous variants of the MA created by experts. Starting from as simplest as average of certain candle periods to the most complicated formula that consider a specific level of significant value.

MA’s are considered as a lagging indicator. Considering this, many people are competing to refine the basic formula by entering new parameters. Until now, there have been no fewer than 45 types of MAs with various variations.

Enough with all the background regarding the MA. Now the most important thing is, how to set the best MA so that we can get optimal profit.

The basic concept in setting up a Moving Average

Once again we must remember that MA is an indicator that recognizes ongoing trends. With this premise, we know that trends are very closely related to time. Trends in the past week can be very different from the current trend in the past month. Especially compared to the past six months, the last year, the last five years, even the last 10 years. It is possible that in the last one year the price of a commodity or currency pair is in a downtrend, in contrast to the condition of the past week where prices are continuing to move up.

Based on this, then in using a MA we must consider a minimum of three periods which are our references, namely short, medium and long periods. As a variation, maybe you can also use two short periods and one long period. Which is better than both? I would suggest the first one more. Why? Using two short periods may be good at determining your entry point, but you lose a period between short and long periods. You will lose a connecting bridge that illustrates the correlation between short-term movements with long-term trends. This is very dangerous for your trading, especially if you are a beginner trader.

So, whether you use a combination of daily-weekly-monthly or monthly-quarter-semester or even quarterly periods, I still recommend that you always use a combination of three short-medium-long MAs.

Recommended period numbers

The MA period which is usually recommended by default is 14. Beginner traders usually do not understand where these numbers are obtained. This is given as it is, and is usually used for granted. Some will add or reduce it, but how much is needed, nobody knows. Each changes it as they wish. Here I will explain how I determine the number.

I am a daily trader. You certainly know the intent of the daily trader I mean here. Yes, I make transactions with an average of no more than one day open and close. So, I use the daily trend period compared to the weekly trend with a monthly long-term trend reference.

As a daily trader, I used to use the 1H timeframe for my trading. Sometimes I jump to M15, but I don’t do it too often. Sometimes I also see H4 as a consideration, but I very rarely trade on this timeframe.

So, I will suggest period numbers for daily traders. Can these numbers be used by long-term traders or vice versa the scalper? It could be, of course with a little adjustment.

Basically I divide the trend period with the timeframe I use. This is the period number key that I use. For example, if I want to map the daily MA period on the 1H timeframe, I use number 24. This number is obtained from how many 1-hour candles are produced in 1 day. I use the same method if I want to describe the weekly trend in the 1H timeframe. The formula that I use is the number of candles in a day multiplied by 5 days (active trading days in a week) equivalent to 120. Next, to get an overview of monthly trends, the multiplier that I use is an active day of trading in one month equal to 480. (Note: the number of active trading days in one month varies between 20-22, so I am rounding to 20 days).

Thus, I have gotten an overview of trends in the short (daily), medium (weekly), and long (monthly) periods, namely 24, 120, and 480. It is easy right?

What about scalpers or swinger? You can adjust the period by considering the things in the Best MA Setting for Scalper and Best MA Settings for Swinger

What is the difference of Forex Brokerage from the Ordinary Money Changer?

Firstly, there is no very basic distinction between online currency exchange/trading and the ordinary money-changer. Generally, both entities benefit from the spread. Spread is the left amount after subtraction between the buy-sell prices. Spreads between various institutions may differ relying on company policy. However, basically this is how this business goes.

Forex has its leverage mechanism. The existence of leverage, among others, is the most point or way in which physical exchange of money at the public money changer and forex trading are not the same. The mechanism of leverage allows buyer-seller to make high volume transactions with small investments. Thus, high gains can be achieved even in small movements in the transaction parity. The highest leverage ratio allowed in most country is 1: 100, which means that the investor can make a transaction with 100.000 USD with a guarantee of 1,000 USD. Yet, sometimes there are small broker offer higher leverage to attract consumers. The highest leverage offered by broker until this article published is 1 : 3000.

Another contrast between money changer and foreign exchange (FX) market is that the last is a bi-directional market. In physical market, we can only sell if we have goods (in this case, physical money itself). It is barely possibly to sell no money to changer office. On the other way, in order to benefit from the rise of an opposite currency pair, we may also make a sale transaction to take advantage of the decline as we do the buying transaction. For example, USD / TRY: 2.9000 level and we think it will drop by selling a sales process, we start to make profit at the moment when the parity starts to fall below 2.9000. Taking the resident producers in Turkey get out of raw materials bought dollars at time t, t + x is the risk of falling dollar prices at the time. Because the raw material at a low price can be purchased at a high price. In order to hedge against this risk, Forex markets have a sales position in USD / TRY parity so that even if the dollar falls, it gains a profit and avoids risk and is called a hedge.

Forex can be invested not only on currency pairs, but also on commodity products and indices such as gold, oil, copper and silver.

One of the major advantages of the FX market is the possibility to process data instantly. Forex market is open for 5 days and 24 hours. Therefore, currency can be dealed almost all the time (except when holiday). There is no opening and closing hours such as money changer office. Forex traders, for example, are expected to see a change of prime minister, resignation etc. when there is an unexpected event during the night. they can instantly evaluate the data and gain a change in the parity.

Forex markets are not physical. The physical delivery in the purchase-sale transactions is not applied. Traders do not need to take the high quantity of money to the changer office for trading. One can perform transactions by sending orders via the internet whenever and wherever he/she wants. When the investor wants to sell, the buyer finds the opposite because forex is the world’s largest financial exchange-market where daily sum of exchange overreach USD 5 trillion.