Student's Question:Is this the correct way to use Moving Averages?Instructor's Response:Yes, well done...In your example on the historical chart of the EURUSD, the 10, 20 and 50 EMAs (Exponential Moving Averages) were used. The "faster" the moving average, the more sensitive to price movement they will be. In the case of these three, the 10 period EMA is the fastest, the 20 is the second fastest and so forth.As the faster Moving Averages begin to cross the slower MAs to the upside that would indicate a higher probability buying (long) opportunity.As the Moving Averages cross over each other and then begin to fan out (move away from each other), that indicates that the move is strengthening and gaining in momentum...see the area on the chart below.
Should the Moving Averages crossover each other to the downside, that would signal that momentum favors a short (sell) position.
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