Double Moving Averages — Combining For Enhanced Results

 

As the most basic trading tool there is, Moving Average (MA) has many fans. Traders use it for its compatibility with other indicators — it compliments many strategies well and can be used on any trading instrument. There are many Moving Averages strategies: for example, traders may use MAs as a support for oscillating indicators. The universality of these indicators may allow for usage of Moving Averages for day trading, as well as for trading on longer timeframes.

Moving Averages can also be combined with each other. This indicator is based on a calculation of the average price on the chart. By using several Moving Averages and setting different time periods for them, it might be possible to get a better understanding of the prevailing trend and make decisions regarding trade entries and exits.

There are many ways to combine Moving Averages. One of the approaches requires just two MAs, which makes it available even to novice traders.

Double Moving Averages approach

This method calls for two Exponential Moving Averages (EMAs) set with two different periods: 100 and 14. This way, a trader operates with a very smoothed 100-period EMA, which reflects the market movement on a bigger scale, and a fast 14-period EMA, that responds to the short-term trend.

The Double Moving Averages approach cannot give any concrete guarantee of positive outcomes or success. Since the market can be quite unpredictable, there is no sure way to know what will happen next. However, this approach is an enhancement of a standard Moving Average crossover, and since a rollback of the price is taken in consideration, this method might potentially allow a trader to enter a trade with better price conditions without this being guaranteed. 

The set up

The Double Moving Averages approach might be an introduction to using indicators with custom settings for those who are used to the default settings. To set up two Moving Averages with different time periods, first find the Moving Average indicator in the indicators menu in the left bottom corner of the traderoom.