News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Mixed
GBP/USD
Bearish
USD/JPY
Bearish
More View more
Real Time News
  • Knowing how to accurately value a stock enables traders to identify and take advantage of opportunities in the stock market. Find out the difference between a stock's market and intrinsic value, and the importance of the two here: https://t.co/QszmdZFxlk https://t.co/obH0RFLKhC
  • It was a big Q1 for $USDJPY but so far Q2 has been a far different tone. Which side will prevail? Get your market update from @JStanleyFX here: https://t.co/TxlD3zoglZ https://t.co/rUQnokAx30
  • The continuity seen across these volatility cycles is a good thing. Historical precedence offer a blueprint for identifying conditions supportive for a vol-event to occur, and how they may unfold. Deepen your knowledge of historical volatility here: https://t.co/vg7w10la3j https://t.co/ycjWjCETQJ
  • The RBA highlighting several key risks to the local economy in its semi-annual FSR may drive AUD lower against haven-associated currencies despite the expectation of strong Q1 GDP figures out of China. Get your market update from @DanielGMoss here: https://t.co/kLZ8DQxH3z https://t.co/KubqA24TLH
  • Get your snapshot update of the of relative currency strength and exchange status from around the globe here: https://t.co/H19vRDCpUJ https://t.co/36Sy4DOnFD
  • Though the $SPX hit a record high through Friday, there was little momentum and far less correlation across various risk assets. Can we find more serious traction - or a reversal - amid earnings, inflation-Fed forecasting, US-China trade negotiations? https://www.dailyfx.com/forex/video/daily_news_report/2021/04/10/SP-500-Outlook-Carries-Risk-Trends-Dollar-Event-Heavy-on-USDJPY-USDCNH.html https://t.co/AVTM9QvEGQ
  • The Spinning Top candlestick pattern forms part of the vast Japanese candlestick repertoire with its own distinct features. Gain a better understanding of the spinning top candlestick here: https://t.co/DWm7cBMUg9 https://t.co/Gd6eIbE1mb
  • There’s a strong correlation between interest rates and forex trading. Forex is ruled by many variables, but the interest rate of the currency is the fundamental factor that prevails above them all. Learn how interest rates impact currency markets here: https://t.co/J0EPMD2Cfi https://t.co/Jf96VhFDOp
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/BdgFmkRxVw https://t.co/Rjfdv8jLQV
  • A currency carry trade involves borrowing a low-yielding currency in order to buy a higher yielding currency in an attempt to profit from the interest rate differential. Find out if the carry trade suits your trading style here: https://t.co/7t4BzmLg8w https://t.co/a6qsFOcPUl
200 Day Moving Average: What it is and How it Works

200 Day Moving Average: What it is and How it Works

Richard Snow, Markets Writer

What is a 200 Day Moving Average

The 200 day moving average is a technical indicator used to analyze and identify long term trends. Essentially, it is a line that represents the average closing price for the last 200 days and can be applied to any security.

200 day moving average chart for the S&P 500

The 200 day moving average is widely used by forex traders because it is seen as a good indicator of the long term trend in the forex market. If price is consistently trading above the 200 day moving average, this can be viewed as an upward trending market. Markets consistently trading below the 200 day moving average are seen to be in a downtrend.

How Do You Calculate the 200 Day Moving Average?

The 200 day moving average can be calculated by adding up the closing prices for each of the last 200 days and then dividing by 200.

200 Day Moving Average Formula = [(Day 1 + Day 2 …. + Day 200)/200]

Each new day creates a new data point. Connecting all the data points for each day will result in a continuous line which can be observed on the charts.

How Do You Use the 200 Moving Average in Your Trading Strategy?

The 200 day moving average has gained in popularity as it can be used in many different ways to assist traders.

Using the 200 Day MA as Support and Resistance

The 200 day moving average can be used to identify key levels in the FX market that have been respected before. Often in the forex market, price will approach and bounce off the 200 day moving average and continue in the direction of the existing trend. Therefore, the 200 day moving average can be viewed as dynamic support or resistance.

Below is an example of how price approached and bounced off the 200 day moving average on the EUR/USD chart:

200 day moving average chart EUR/USD

Traders will look to go long as price bounces off the 200 day moving average when the market is in an upward trend. Likewise, traders will look for short entries after price bounces from the 200 day moving average in a down trending market. Stops can be placed below (above) the 200 moving average in an uptrend (down trend).

MA Crossovers

Once the long-term trend is identified, traders often assess the strength of the trend. This is important because a weakening trend could signal a trend reversal and presents the ideal time to exit an existing trade.

Incorporating shorter term moving averages like the 21, 55 and 100 day moving averages, allows traders to determine whether the existing trend is running out of steam because they track more recent price movements over a shorter time period.

The GBP/USD chart below, shows how the smaller, faster moving averages signal that the uptrend may be about to reverse. The 21 day (green) moving average crosses through the 55 day (black) moving average and continues to cross the 100 (blue) and 200 (red) day moving averages to the downside. These are all bearish signals that appear before the 200 day moving average presents a bearish signal.

GBP Forecast
GBP Forecast
Recommended by Richard Snow
Receive a comprehensive forecast of the Pound Sterling
Get My Guide
shorter time frame moving average crossovers

Using the 200 Day Moving Average as a Trend filter

One of the easiest strategies to incorporate with the 200 day moving average is to view the market in relation to the 200 day moving average line. Traders commonly do this to analyze the general market trend and then look to only place trades in the direction of the long-term trend.

In the NZD/USD chart below, the market is trading above the 200 day moving average for a prolonged period of time. This means that the market is trending upwards and therefore, traders should only be looking for long entries into the market. The example below makes use of the stochastic oscillator however, traders should make use of an indicator or any other entry criteria they feel comfortable with.

filternng trades in the direction of the trend using the 200 day moving average chart

200 Day Moving Average Indicator: A Summary

  • The 200 day moving average is a widely adopted indicator showing the direction of the long term trend in any market.
  • Due to its mass adoption, the 200 day moving average can often be considered a self-fulfilling prophecy.
  • Traders use the 200 day moving average to filter trades in the direction of the long term trend and look for bounces off the 200 day moving average to inform trades.

Become a Better Trader with Our Trading Tips

  • The 200 day moving average is just one of many helpful indicators. Expand your trading knowledge by reading our article on some of the most popular technical indicators
  • If you are just starting out on your trading journey it is essential to understand the basics of forex trading in our free new to forex trading guide.
  • Moving averages are trend following indicators. Other trend indicators include the Ichimoku Cloud, Average Direction Index. Alternatively, trends can be identified with the use of trendlines.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES