Do you know the best moving average setting?
In my eight nine years of trading journey, I have used many different moving average settings to find different things.
So, I decided to rank the best moving average settings using a tier list!
Things I’m going to put near the top of this list are good, and things near the bottom are bad.
Number 1: When I was mainly trading on smaller timeframes, I used a 9-period moving average to see the direction of the momentum.
Since it’s a fast-reacting moving average, it’s super useful.
So, when the price doesn’t have strong upward or downward momentum, it crosses this moving average frequently.
But when there is strong momentum, the price stays on one side of this 9-period moving average.
I used this to find and analyze the strong momentum charts.
When I gained enough experience, I got used to reading the strong momentum directly by looking at the price action.
So, over time, the usage of this 9-period moving average has gone down in my trading journey.
I will put it in the A tier.
Number 2: In my experience, anything above the 200-period moving average is not that useful.
If we use a 500-period moving average on the 1-hour forex timeframe, then it’s showing us the average price of around 30 days.
In the stock market, a 500-period moving average on the 1-hour timeframe shows the average price of around 100 days.
But I have not found many use cases of the 30 or 100-day price trend when my 1-hour timeframe trade is only going to last a few hours.
So, I will rate any moving average above the 200-period in the D tier.
Number 3: Traders use the 50-period moving average to see the medium-term trend.
However, I have not used it that many times for this because I used another one that you will see next.
But this 50-period moving average is also very good at identifying medium-term trends.
I will put it in the B tier.
Number 4: I have used the 21-period moving average many times to identify the short-term to medium-term trend.
If the price is staying above it, it’s a good short- to medium-term uptrend.
I have even used it with the 9-period moving average.
If the 9 EMA crosses above the 21-period moving average, then the short-term downward move is losing its strength.
If the 9 EMA crosses below the 21 EMA, then the upward move is losing its strength.
I used this 21-period moving average more times than the 50-period moving average to analyze the medium-term trend.
Pretty sure it was just because of the simplicity.
I mean, the 21-period moving average showed me both short-term and medium-term trends while keeping the chart clean.
I would put it in the A tier.
Number 5: I have not used the 100-period moving average that much.
Yes, it can show the long-term trend.
But I have found the next moving average to be better for that.
I will put this 100-period moving average in the C tier.
Number 6: The best moving average I have used in my entire eight to nine years of trading journey, which not only shows the long-term trend but also acts as good enough support and resistance many times in the long-term trending markets, is the 200-period moving average.
Price above it means there is a long-term uptrend going on.
Price below it means a long-term downtrend.
Since it also acts as good support and resistance in trends, when I take a long trade near it with other entry reasons, I like to set the stop-loss below this 200-period moving average as well.
When the price crosses this long-term moving average frequently, I see the price as ranging or slow.
I have even created the free Trading Rush Moving Average indicator based on this, which disappears in range markets.
Basically, the 200-period moving average is one of the rare indicators that has stuck with me from the start of my trading journey to now.
It’s always been very useful in multiple scenarios!
That’s all!