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Chapter 11, Part V. Using Moving Averages. Displaced MA. Page 6

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 18, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Commander in Pips: So, as you can see, a DMA has a lot of advantages, compares to SMA. DMA is better at holding the trend and has rarer falls in fake outs. DMA shows you buy or sell signals earlier than asimilar SMA, but with greater period. And finally, a DMA shows you precisely the value ahead of time – for the current trading period and even further. That’s why I like DMA. I suggest you should try it, even if you turn back to SMA then.

    Pipruit: You’re absolutely right, I definitely will do it. But can we use SMA, and still have its value for current session somehow?​

    Commander in Pips: Well, there is one decision – you may build an SMA based on open prices, instead of close prices. In this case – you will have it, but I didn’t check how useful this method is on real markets. Here you should try by yourself.

    So, as a shallow conclusion I can say:

    1. I prefer to use DMA instead of SMA due to the qualities that I’ve said already;

    2. To my mind, there is not any great advantage between displaced EMA over SMA (at least for me). That’s why I use displaced SMA.

    3. Here some numbers to start – Joe DiNapoli uses followed displaced SMA: 3x3; 7x5; 25x5. 3x3 is for the short term trend, 7x5 for the medium term and 25x5 for the long term trend estimation. Maybe these numbers will be useful for you, at least you can start your own analysis with them, and later correct them according to your own trading style.

    4. Also, as you understand from our discussion, the major advantage with any moving average is in simplicity of their application. You do not have to make some difficult calculations or observations for telling what trend is it currently – upward or downward. It will be enough just to estimate where is the close price – above or below some MA.

    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.

    P.P.S. Sive Morten's primary focus is trading EUR/USD. If you wish to receive his FREE trade recommendations for EUR/USD, please subscribe here for free.

    Note: FPA ranks are earned in the battles against scam, not in the classroom.
    #1 Sive Morten, Dec 18, 2013
    Lasted edited by : Mar 12, 2016
    Hamza Samiullah and fran alvarez like this.
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