Combining Moving Averages With Candlestick Patterns

Moving Averages are simple yet powerful

Moving Averages are simple yet powerful. They are one of the most popular indicators used by traders in almost all type of markets. There are basically three type of moving averages, simple, weighted and exponential. Each one has its own advantages and disadvantages.

Moving averages can be useful when you are looking to confirm a trend. The first rule of thumb when using moving averages is that when the currency pair price is above the moving average, an uptrend is in place. When you combine this with a bullish candlestick pattern you can get profitable entry and exit signals. Similarly, when price action is below the moving average, a downtrend is in place.

Now combining these moving averages with candlestick patterns is a good strategy as both tend to confirm each other. When a trending candlestick pattern appears above the moving average, it means trend continuation. This confirms what the moving average is telling. You can safely enter into a long trade.

However, a better method would be to trade with two moving averages instead of one. When you combine two moving averages with candlestick patterns, you get a powerful combination. In this case, the trend will be defined by the location of slow moving average (the one having more periods) relative to the fast moving average ( the one having less periods).

When the slow moving average line crosses above the fast moving average line and starts trading above the fast moving average line, it is a signal that an uptrend in the market has started.

It is a signal that an uptrend is in place in the market. When this is further confirmed by the appearance of a trending candlestick pattern, you can enter into a long trade and continue riding it until the slow moving average again crosses down below the faster moving average as it signals the start of a downtrend in the market.

However, many traders find it difficult to recognize trending candlestick patterns in time.

Now, there are more than 40+ candlestick patterns that are considered to be important trend reversal and trend continuation patterns. You can use a Candlestick Patterns Recognizer Indicator that can easily recognize anyone of these candlestick patterns and indicate the type on the chart. This way, you don't have to waste time figuring out what pattern has been formed.

Combining moving averages with candlestick patterns can be extremely powerful.

by: Ahmad Hassam

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