Moving Average Trading Strategy Mistakes Beginner Stock Traders and Forex Traders make in Intraday Trading / Day Trading, Swing Trading. Avoid these and learn the best trading strategies to make money in trading!
Who doesn’t want to turn thousand dollars to hundreds of thousands of dollars? before i started making money in stock and Forex trading, this is what my charts used to look like. this trading setup is absolutely garbage. there are better ways to use moving averages for trading! Today, I will show 5 Moving Average Mistakes, You Should avoid, to make more money, than you ever could. Number 5, taking trades on every pullback near a moving average. A lot of new traders, make mistake of taking trades, as soon as the price touches their moving average. #movingaverage #trading #tradingstrategy
Yes, moving average acts as a support and resistance, but not every time. Stock market, and Forex Market, are not your servants, to follow your rules. Market can go straight through your moving average, and change direction of the trend anytime.A better strategy, is to wait for the market to create sell or buy signals. Then and only then, you should enter a trade, with a proper stop loss. This is a game where the impatient person loses money, and a patient person makes more money. Hold your horses, and wait for the right entry signal near the moving average.Number 4, not understanding the difference between Exponential moving average, and simple moving average.Moving average is a lagging indicator. And it can be really bad for you in certain situations.
They don’t take future price movements, events, and high low demands into consideration. If you are day trading, it is a good idea to use Exponential moving average, instead of using simple moving average. That’s because Exponential moving Average will react to sudden price movements quickly, than the slow Simple Moving Average ever will. Third mistake, is trading a flat Moving average. If you find a moving average line looking flat, or in other words, horizontal on a chart, it is an indication that there is no trend going on. Market is not trending and is in a range.If you are using a moving average, you are most likely a trend trader. Remember, trend is your friend. The big market makers move the market, your impact on moving the market is almost null.
If the market is in a range, and is barely making any big moves, it is a good indication that, there are no big market movers trading right now. You should avoid range, to not lose money.Number 2, Not looking at other moving averages at all.Just because a 20 period moving average indicates an up trend, doesn’t always have to mean the market is going to go higher. There maybe a 200 period moving average resistance above, and market may go in the opposite direction instead.
In this case, you will lose money. Some even blame the moving average, for not working properly.It is recommended. to at least use two moving averages on a trading chart! One should be 20 period Exponential Moving Average, and other Should be a 200 period Exponential moving average. 20 E M A, will show you the short term trend, and 200 E M A, will show you the long term trend. They both will acts as a support and resistance on a chart. It is a good rule of thumb, to use 200 period E M A, as your main trend indicator, to have a higher chance of taking trade in the right direction.Number 1 mistake new traders make, is to ignore other support and resistance. I’ve seen this so many times happen.
Just because moving average is showing an up trend, doesn’t have to mean that the market will go higher. There maybe a strong resistance upcoming, that may change the direction of the trend completely.If you see a strong support or resistance coming, you should wait, and see how other people react to it. Furthermore, market won’t always change direction, and give you an accurate pullback. therefore, to increase your winning, it is good idea to take trades, near support and resistance, other than the support of Moving average alone.
if you are a stock trader, you can even use VWAP. VWAP indicator is really important, and will increase your chances of winning even more. I will make a video on VWAP soon.
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