One of the best and most useful technical analysis tools in the market once you have mastered how to use it is exponential moving average. This tool is a great indicator of the strength of the market and measuring price trends. Moving averages specifically reflects the average price of an asset over various time frames.
Because of its potential to be controlled, Exponential Moving Average is ideal for use in technical analysis. The data generated by the Exponential Moving Average can be used to measure trends when it is compared with prices. This is why recent date is considered a stronger point to base trades on when utilizing exponential moving averages. They are widely considered more accurate and powerful indicator than regular moving averages because the latter tend to regard all the data as having the same value.
An exponential moving average technical analysis usually deploys a thirty day exponential moving average and its correlation with a set of two timeframes. The two time frames are usually not the same and the first one is always longer than the second one. If a trader is utilizing a twenty-four hour price chart and the asset price is well above a thirty bar, it points towards a bullish trend. However, when below the thirty bar a bearish trend is most probably in the making.
It is, however, important to note that you have to be very conversant with asset price as it relates to the long term trend. A typical example of this is if the asset price has been above the moving average over a long period of time, it may indicate that resistance will probably take place in the nearest future.
Once you have determined that an underlying trend will most likely not hit resistance and then take a look at the thirty minute bars. You need to go back and look at price action over a period of two week and see if you can accurately determine if resistance and support levels within the past two to three days can be conclusively verified. If an upward trend is indicated it’s a perfect time to enter into a trade when an asset price comes from below to cross a bar or has probably been above it and goes down a little bit. Once you are able to master how to read it, you can trade very successfully with your binary options broker on exponential moving average.
Cover Image via Nick Gray