The use of the moving average in the Forex market has become a very common phenomenon. Sadly, novice traders start using the moving average and fail miserably. They don’t have any clue 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 the professional traders in the Mena region, you will find many retail traders are using the 100 days 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
If you do the analysis, you should be able to find the function of the 100 periods moving average. The 100 days SMA works like a dynamic support and resistance level. If the slope of the 100 days SMA is positive, you may expect the price to rally higher. On the contrary, if the slope is negative, you should be expecting a sharp fall in the price. When the price tests the 100 days SMA, it will respect the moving average just like the support and resistance level.
Execution of the trades
Many trained professionals executed trades at the 100 days moving average using the price action confirmation signals. But to use a price action trading method, you need to choose your broker very carefully. Though Forex trading in UAE is very popular, few traders know the proper way 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 be able to 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
By 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 learn to use the 100-period moving average well, you can easily locate the reversal point in the trend. For instance, if the price of a certain asset breaks above the 100 days SMA, you may expect the price is ready to move to a new high. On the other hand, if the price of a certain asset breaks below the 100 days SMA, you should consider it as a sign of a bearish reversal.
Determines the existing point
With the help of 100 days SMA, you can even determine the exit point for the trades. That’s why many professional traders love to rely on the 100 days SMA as it helps them to determine 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 you intend to use the 100 periods SMA.
Keeps the trading process simple
The 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 days SMA and create a robust trading strategy.