How to Trade with the SMA Indicator on the IQ Option Platform

SMA Ready

You will agree with me when I say:

Successfully predicting trends on IQ Option is kind of hard with bare eyes. And it’s made even harder when you are counting on small changes to make a profit.

Or is it?

Well, it turns out; you can actually predict trading trends using technical analysis with the help of trading indicators. These indicators will help you get a peek into where the trend will possibly head. Therefore planning your next move and raking profits in the process.

For that reason, today, I am going to show you how to use SMA strategy (simple moving average) to successfully predict market trends on IQ Option.

Let’s get right into it.

What’s the SMA indicator?

In a nutshell, SMA or simple moving averages, is an analytical tool right on the IQ Option trading interface, helping you reduce the market noise by smoothing the volatility to reveal either an impending uptrend or downtrend.

How?

Good question.

To understand this, let’s first look at how simple moving average in IQ Option is arrived at.

SMA is the sum of all recent closing prices of the selected instrument over a specific time period and then dividing the total by the total number of time periods used.

Let me explain using an example:

Let’s say you are trading on Microsoft stock…

…Five most recent closing prices look this: –

28.93+28.29+28.43+28.90+28.47 = 143.02

Now, to arrive at the simple moving average of Microsoft stock on IQ Option, divide the total by the number of time periods you sampled, which in this case is 5

5-minute SMA = 143.02/5 = 28.60

How simple was that?

I love the fact that SMA is nothing but just math.

Now that you know how this works, how about we discuss how to use it in the IQ Option platform?

Not so fast.

What Does The Simple Moving Average In IQ Option Tell You?

I understand why you can ask such a question.

As you can see, the SMA indicator is all about addition and division, how then, can all these be used by a trader like you to make an informed trading decision and bag more profit?

Continue reading to find out.

But for now, you need to know that the simple moving average is highly customizable.

What do I mean?

This indicator relies on historical data pulled from different time periods which are extremely up to you to choose.

In fact, the art of specifying the SMA time period is a trading strategy of its own.

Let me explain.

If you want to trade short, i.e. 10 minutes or less, you will be using SMA10. At the same time, if you are trading long, let that reflect on the simple moving average.

With that said, as mentioned earlier, SMA smooths out the volatility in the price of the IQ Option instrument, making it really easy to see the price trend.

Such that, if the simple moving average points upwards, it means that the price of the instrument is increasing (uptrend). If it points down it means the market is on a downtrend.

With this in mind, let’s look at how to set up the simple moving average in IQ Option.

How To Set Up Simple Moving Average In IQ Option.

Here’s a step by step process to follow when setting up SMA indicator in IQ Option

1. Open your IQ Option account and go to the trading interface.

If you don’t have a trading account register here.

2. Locate the ‘Indicators’ button, bottom left corner of your screen then click on ‘MA’

Kenya Forex Expo SMA Indicator

  1. Click on the ‘Set up & Apply’ Here’s where you will pick the period that suits you and choose SMA on the drop-down menu. Choose the color for better visibility. Once satisfied, click ‘Apply

Setting SMA

Congratulations!

You just added a simple moving average indicator into the IQ Option trading dashboard.

Simple Moving Average IQ Option Strategies.

Finally, I will show you popular SMA indicator strategies used by fellow traders to bring in profits consistently.

Why am I bringing this up now?

While it is true that there are a ton of simple moving average strategies out there, you cannot almost re-invent the wheel without taking a beating.

If you think you can come up with 33 SMA out of blue and beat the market, let me stop you right there.

It is advisable to use the most common SMAs because of one reason.

They work and probably that’s why almost everyone is using them.

SMA Strategy #1: Identifying the existing trend.

When you set up the simple moving averages indicator, it reduces the price noise, giving you a clear view of what’s behind the price fluctuations and hence determine what you should do next.

Example, trading with SMA10.

Setting SMA

  • Buy when the SMA10 cuts the price line right on the bullish candle from below and continues moving in the upward direction. This shows the possibility of uptrend.
  • Sell when the SMA10 crosses the price right on the bearish candle and continue moving below it, indicating a downward trend.

SMA Strategy #2: Set Stop Loss And Get Out Of A Trade.

While SMA indicator can help you get into a trade and continue riding the trend, if you continue without a way out strategy, you can lose everything you’ve accumulated during the trend.

Therefore, you need a way to know where to get out of the trade and make a profit. That’s of course if you are trading Forex on IQ Option.

That’s where the SMA indicator comes in.

  • Wait for the instrument price to close below or above the higher SMA in a cross then make your money.
  • Alternatively, you can leverage the average true range to position your stop loss in IQ Option.

SMA Strategy #3: Take profits.

If you may ask me, one of the best ways of taking profit when applying simple moving average would be to get in and out of trade using the stop loss/take profit we covered above.

Alternatively, if you see the instrument price moving towards a strong and tested resistance or support line, pull out some profits off the trade.

You can always come back to the trade once the line has crossed the support or resistance level. Or better yet, once the retracement ends, and you get a fresh entry signal from lower SMA crossovers.

Using the SMA together with Other Indicators to Pick More Reliable Signals.

You can also use the SMA with other indicators or oscillators to be sure that you are trading on the right direction.

one such indicator is the Parabolic SAR.

Used together with SMA, the parabolic SAR helps to confirm the direction of a trend and gives signals when to enter the market.

Example, you can trade up if these two conditions are met on SMA-Parabolic SAR strategy.

  1. The current quote is below the moving average.
  2. And the Parabolic SAR is below the quote.

Similarly, you should trade down if: –

  1. The current quote is above the moving average.
  2. And the Parabolic SAR is above the quote.

Trade up or down

Summary of SMA indicator in IQ Option

The simple moving average is just as simple as it sounds. As you’ve seen, it is simple to set up and interpret on IQ Option platform.

Try it now on IQ Option demo account.


Also Read – How To Open an IQ Option Demo Account For Beginners.


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