The use of the moving average in the Forex market has become a widespread phenomenon. Sadly, novice traders start using the moving average and fail miserably. They don’t know how to set the perfect period to analyze the market data. Usually, the higher period gives more reliable data, and the lower period is more responsible for small price changes.
Considering the nature of the moving average, you need to devise a robust plan. If you study the actions of professional traders in the Mena region, you will find many retail traders are using the 100-day SMA to find profitable trade signals. So, let’s find out the key reason why the 100-day SMA is so popular.
Works as the dynamic support and resistance
You should find the 100-period moving average function if you do the analysis. The 100-day SMA works like a dynamic support and resistance level. If the slope of the 100-day SMA is positive, you may expect the price to rally higher. On the contrary, if the slope is negative, you should expect a sharp price fall. When the price tests the 100-day SMA, it will respect the moving average, like the support and resistance level.
Execution of the trades
Many trained professionals executed trades at the 100-day moving average using the price action confirmation signals. But to use a price action trading method, you must choose your broker carefully. Though Forex trading in UAE is prevalent, few traders know how to find a great broker like Saxo. If you do the market analysis with a faulty trading platform, the chances are high that you will never do the perfect market analysis in a standard way. So, take your time and evaluate the market data with the best trading platform.
The reversal in the trend
Using the 100-day moving average, you can also spot the major reversal in the market. Many retail traders think they know everything about this market. But when it comes to a trend reversal, they become confused. They eventually start learning news analysis and still struggle to identify the major changes in the trend. But if you know to use the 100-period moving average well, you can easily locate the reversal point in the direction. For instance, if the price of a certain asset breaks above the 100-day SMA, you may expect the price to be ready to move to a new high. On the other hand, if the price of a certain asset breaks below the 100-day SMA, you should consider it a sign of a bearish reversal.
Determines the existing point
With the help of 100 days of SMA, you can even determine the exit point for the trades. That’s why many professional traders love to rely on the 100-day SMA, as it helps them to choose the perfect exit point. For instance, if you take a long trade, you can ride the bullish trend till the slope of the moving average becomes negative. But remember, if you intend to ride a trend, you must analyze the data in a higher time frame. Many novice traders have tried to use the 100 SMA in the lower time frame, but eventually, they switched to the higher timeframe. Higher timeframe trading is more profitable, especially when using the 100-period SMA.
It keeps the trading process simple.
Professional traders in the Mena region love to use a simple process. They never rely on a complex trading mechanism since they know the risk factor will be very high. To keep your funds safe, you should develop a simple trading process. Use the demo account to learn the proper function of the 100-day SMA and create a robust trading strategy.
