forex sato
 (MA for short) is a very basic indicator known by just
about every trader. If you haven’t heard of it by now then you must really be
a newbie to trading. Because of it is so commonly known I won’t go deep
into this subject, but will touch upon it for two reasons. (1) To introduce it to
those who aren’t yet familiar with it, and (2) to explain the basics of it as it is
the foundation of “S.E.X. Lines”, which is dealt with in the next section.
Ok, the next few paragraphs are for those of you who are new to trading to
understand what an SMA and EMA is. If you already know about these then
just skip down a bit to get to the juicy part, or better yet just read it as a little
refresher.
An SMA, which stands for “Simple Moving Averages” (some folks and
charting packages simply refer to this as MA or “Moving Averages” as the
“Simple” is just implied) is a basic indicator your charting package will
display over your charts. It draws a line showing the average price over the
past x number of periods. Lets say you are looking at a one hour chart (each
candle represents one hour) and you set your SMA to “10”. What it’ll do then
is it will add the closing price of the previous 10 candles and then divide the
sum by the number of periods, in this case 10, to find the average price from
the past 10 periods (ten hours in this example). This is a simple math
procedure you’ve learned to do in elementary school. With each successive
period (new candle to the right) it redoes the computation of calculating the
average of the past 10 periods by removing the last candle (the now eleventh
candle to the left) and adding the newest candle’s price into the average. It
keeps redoing this calculation for all the candles displayed on your chart and
then plots the average prices onto your chart. Since the prices keep moving,
thus changing the average price, the line moves following the current market
moves, hence why this is called a Moving Average. The chart below has a
green line showing the 10 period SMA.
An EMA, which stands for “Exponential Moving Average” is another basic
indicator your charting package will display over your charts. Like the SMA
described above it also creates a Moving Average price line on your charts
however the main difference is that the SMA computes a simple average
where each period is valued equally whereas the EMA places more emphasis
on the more recent prices. As the more recent prices are valued more than the
older prices the “average” price tends to be closer to the current market
price. The chart below has a purple line showing the 10 period EMA. What
is important to notice is that though both lines show the same moving average
period the purple one (EMA) is more responsive to the actual market
fluctuations, and you also see that it crosses over the green line (SMA) after
forex sato

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