Understanding Moving Average Indicators on IQ Option – SMA, WMA and EMA

Moving average indicators are most popular technical analysis tools on IQ Option and for a good reason.

They are simple and with no doubt deliver results.  As a result, successful traders on IQ Option trust them to bag profits.

In today’s post we discuss all of them explaining:

  • What moving average indicators are?
  • How they work.
  • How to set them on IQ Option trading platforms.
  • And a few moving average strategies that you can start experimenting on immediately.

So, if you are looking for answers to the above questions, stick around because that’s what you are going to get exactly.

Let’s get started, shall we?

What are moving average indicators on IQ Option?

MA, as mostly referred to, are technical analysis indicators used by trading pros to smooth out the market price action by isolating the random market volatility.

Known to many a trader, moving average tools are trend following indicators simply because they base their calculations on the past prices of the trading instrument you’ve chosen.

Consequently, IQ Option traders rely on them to:

  • Determine the resistance and support levels.
  • Identify the general trend direction.
  • And to pick entry points into the market.

Once you grasp how moving averages work, you’ll find that they are four and almost different by how they give signals.

Types of moving average.

  • Simple moving average (SMA).
  • Weighted moving average (WMA).
  • Exponential moving average (EMA).
  • Smoothed simple moving average (SSMA).

With these four types of moving averages, only two are commonly used: The simple moving average and exponential moving average.

While the SMA depicts the simple average price of an instrument over a selected period, EMA allocates more weight to the most recent prices of instruments.

How about the other two?

Well, WMA concentrates on the most recent candlestick and the other hand, SSMA doesn’t concentrate on any specific period, consequently, it is rarely used by traders.

Before we proceed, how is the moving average calculated?

This actually depends on the type of MA you are using to trade.

Lucky for you, we have an example ready. Find time to see how simple moving average is calculated on this post.

Done that?

Now, it’s time to set up a moving average on the IQ Option trading platform.

How to set up a moving average on IQ Option.

Follow these steps to add MA indicator into your trading chart on IQ Option.

  • Once you are on your IQ Option account, open the >Indicators<section and then choose the moving average depicted by symbol MA.
  • Next step is to select the time period, then the type of MA you want and finally, click Apply button to add moving average to the trading charts.

It’s as simple as that, but make no mistake, MA is a powerful and effective indicator.

Kenya Forex Expo - Moving average indicators

Here’s how to use it to trade on IQ Option.

How to interpret MA signals on IQ Option.

You will agree with me when I say:

Different traders have different trading goals.

However, and using moving averages is just one of the simple ways to achieve those goals.

How?

Some traders love placing short trades while others swear by long trades. Whichever you subscribe to, moving average indicators can take care of it.

Example:

If you are trading short-term, use shorter moving averages like SMA10, SMA5. Additionally, if you are the long-term guy, long moving averages will work best for you. Set SMA to period 60.

Having said that, you should know this:

The length of the moving average affects its lagging character.

What do I mean?

Short MA indicator only gathers price data from the specified period, so does the long MA. Thus, 200 MA has more lag than 20 MA simply because it aggregates prices for the past 200 days.

Generally, traders are using the 50 MA and 200 MA to trade on IQ Option. And depending on where the breaks occur (above or below) this moving averages, traders pick as vital trading signals.

Some other important moving average interpretations include:

  • Whenever two averages converge, it’s a signal. Where the rising moving average signals a developing uptrend of the instrument. While if the MA is declining, you can take this as a signal for downtrend.
  • An upward trend is confirmed by the bullish crossover. This normally occurs when a short MA indicator cuts across long MA indicator from below.
  • Similarly, you can confirm a downward trend if you see a bearish crossover, where a short moving average crosses a long moving average from above.
  • Using it as a support and resistance level indicator. When the price touches moving average from below, enter selling position. When the price touches the MA from above, it is a signal to buy the instrument

Predicting trends in IQ Option is no joke.

While you cannot successfully predict the future as in what will happen to the prices of an instrument, you can increase the chances of getting it right by combining technical analysis and fundamental analysis.

These two are so powerful especially when you have a practicing ground to test your findings.

For this purpose, open IQ Option practicing account here now and test the MA indicator strategies you just learned.


Also Read: –  How to Place Your First Trade On IQ Option.

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