INSTA FOREX

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Example: You trades 1lot=you will get 1.5usd rebate, 2lot=3usd rebate , 5lot=7.5usd rebate more trades more rebate *the rebate is 150%* win/lose anyway you can get your 150% rebate.

The rebate will direct pay to your instaforex trades account .


How to get the REBATE?
First you need have a instaforex account real account, if don have you can open on instaforex websites.
 


After that you can registered on InstaRebate websites
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How to Open instaforex Trading a/c ?
http://instaforex.com/open_live_account.phpwill see like below picture please click the "Accept terms of agreement"
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Fill the instaforex account opening form :

After that now you can registered on InstaRebate websites










Team at work

ShowFx Asia - Singapore, 2010

MALAYSIA FX EXPO 2009

 

 

 

 

 

 

 

About the company

InstaForex web-site and brand InstaForex belong to the InstaForex Companies Group which unites investment and financial consulting companies all over the world. The main line of InstaForex activity is providing online-trading services to customers all over the world since 2007. Today our clients are citizens of more than 50 countries most of which are countries of Europe and Asia. Every day more than 300 traders open accounts with InstaForex, investing their funds in the stock and currency markets.

InstaForex is ECN-Broker, provided qualitative trading services on Forex market. Cooperation with the biggest market makers and huge Brokers-contractors complete with broad client base provide InstaForex with high liquidity and opportunity to provide really fast on-line service to its clients.

Member of InstaForex Companies Group InstaTrade Investment Company Ltd. (the Russian Federation) has licenses on Brokerage, Dealing and Capital Management issued by The Federal Financial Markets Service in November, 2008. Licenses' numbers on Brokerage, Dealing and Capital Management Services are: 077-11737-100000, 077-11739-010000, 077-11741-001000.

Nowadays more than 200000 individuals and corporate customers are InstaForex clients. Regardless of deposit size every client gets qualitative service, up-to-date technical and consulting assistance. The full spectrum of services is provided to the client immediately after account opening.

Instaforex clients get access to the leading information technologies and high-quality goods of such famous companies like MetaQuotes Software (developer of the most famous trading platform - MetaTrader 4), DowJones NewsWires (Forex and Stocks News), Reuters, e-Signal and other news agencies. An access to the wide spectrum is achieved by one trading account, opened with the company via Internet.

InstaForex Company is recognized as the best broker in Asia 2009 following the results of World Finance Award, the respectable reward in the world of financial markets, held by the World Finance Media magazine annually. One more established European magazine CNBC Business Magazine acknowledged InstaForex Company as the most dynamically developing Forex-broker in 2009. InstaForex Company was also recognized as the best Forex-broker according to the results of ShowFxWorld and ShowFxAsia exhibitions, which were held in Moscow and Kuala-Lumpur in 2009. The complete list of the company's awards you can find in the "Awards" section.

In 2008 InstaForex Company became a participant of the RAFMM, confirming its intention to be among the market leaders and provide clients with the highest level of reliability. Independent Association RAFMM unites licensed companies in Russia and is established for regulation and consideration of situations between brokers and their clients.

Employees of the company are more than 120 people all over the world. We are proud of these people being professionals, making significant contribution in success of InstaForex, which is the role model for many brokerage companies in Russia, Europe and Asia. You can evaluate the workmanship of InstaForex staff due to transparent philosophy of work, focused on needs of every single client.

InstaForex team does all the best in order every client feels high level of services and assistance. We suggest you to become a part of Forex traders community with InstaForex. Start your trading way right now





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FREE WELCOME BONUS:

For receiving the Fixed Bonus it is necessary to authorize a trading account by means of depositing:

not less than 100 USD – for Bonus 30 USD;

not less than 300 USD – for Bonus 110 USD;

not less than 800 USD – for Bonus 200 USD;

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Why choose instaforex?

Tools

Using InstaForex gives you the opportunity to work with 107 currency tools, 34 CFD contracts on American shares, as well as to handle GOLD transactions. We provide competitive and effective spreads for each tool, in order to create comfortable conditions for our clients.

Deposit size

We offer traders the opportunity to work on the money market regardless of the size of the working capital. You simply choose the most comfortable working conditions that suit your deposit and start trading on the Forex market. You can begin working with a deposit of any size, — $10 or $1000 — accurately increasing it in order to cross over to bigger investments for increased profit. Most of our clients began as new traders with a $10 deposit, and have developed into professional traders with thousands of dollars. And now you may do the same!

Leverage

You can choose any leverage from 1:1 up to 1:500 depending on the risk management strategy you use when trading. Should you be a long term trader who abides by conservatism when it comes to capital management, then a 1:100 leverage is for you. But if you are an aggressive type of daytime trader, then a 1:500 leverage may become your irreplaceable profit tool.

Trading at Forex without a spread

InstaForex provides great opportunities for their clients. You don’t need a spread to work on the money market now! This gives new and professional traders even more possibilities! Trading without spreads makes the trading process easier to understand visually, and makes more effective use of technical analysis when accepting trading solutions.

The best swaps among all other companies

InstaForex Company offers the most competitive swaps, refusing from the standard system of making profit with a spread against the client. Instaforex Company is the first one which introduces the EQUAL swap system with sell and buy deals. The swap-accrual in a BUY deal is always equal to the swap-accrual in a SELL deal. The company doesn't take the commission for the swap, as a result the client doesn't overpay, holding the deals more than several hours - in case, when opened positions with a currency instrument are opened by midnight.

Ready assets interest charge

All types of account are charged a 13% annual interest rate. The interest is calculated on sum not used in trading. InstaForex customers need not worry that their profit will be decreased due to inflation. InstaForex creates its own reality, and pays 13% annual interest rates to customer accounts at the end of each month!

Quality of Service

Our specialists offer technical customer support 24/7. Even if you are using a demo-account, you can count on expert advice and get answers to all the questions you may have, until you become experienced enough to start working with a real account. The main goal of our customer support service, in our eyes, is politeness and effectiveness when dealing with customers.

General principles of service provisioning

When InstaForex created a list of provided trading services, an entire spectrum of possibilities became available to traders. If you become a customer, you can be confident that you will get well-timed access to all new types of trading services on finance markets that appear in the near future. InstaForex specialists analyze brokerage service markets and do their best to react to upcoming trends. We constantly seek innovation, by staying abreast of competitor developments; we also continue our regular work and establish new contract types.

How to trade Forex

STEP 1:

The step 1 defines certain concepts and terms of Forex Trading-

Quotes are a vital part of the foreign exchange trading, as Forex trading is done in terms of quotes. Therefore, comprehending these quotes is the first important step.

Firstly, in a Forex quote, the currency listed first is known as the Base currency. For example, we have EUR/USD. Here, EUR is the Base currency.
Secondly, the base currency has always the value 1. In other words, the rate of other currency is calculated against 1 pt of the Base currency. For example, we have EUR/USD where EUR is the Base currency. Then 1 EUR = 1.2323 USD or the value of one currency against the other in the pair.
Thirdly, when dealing in terms of quotes, prices are expressed in terms of Pips. Pips can be defined as “percentage in points” and are mostly the fourth decimal point i.e. 1/100th of 1%.

Also used while trading through quotes, are two significant terms known as Bid and Ask. These two terms are responsible for making trading quote, a two-sided quote.
Bid can be defined as ''The price at which the base currency is sold concurrently buying the counter currency. Ask can be defined as “The price at which the base currency can be bought concurrently selling the counter currency''

STEP 2:

Step 2 illustrates the other key features of Forex trading which are namely, the leverage and the Margin. These two are immensely important in attracting the interest of the traders as they enhance the trading power of the investors.

The leverage is the ratio of the deposited amount to the amount that can be traded. Leverage enables the investors to deposit a small amount of money but still trade for a much larger amount. This way, investors can trade easily, utilizing less money to deal.

Margin, therefore, is the minimum amount required to be deposited before an investor starts trading. This can also be known as the initial amount with which the Forex trading account can be opened.

A detailed Example below illustrates exactly how Forex trading is done-
Supposing the current bid/ask price for EUR/USD is going by the rate of 1.5027/30, giving you the option to buy 1 euro with 1.5030 US dollars or sell 1 Euro for 1.5027 US dollars. Now, if you feel that the Euro is underrated against the US dollar, you would opt on buying Euros, selling your dollars at the same time. So you buy 100,000 euros by paying 150,300 dollars. You can then start analyzing the market, waiting for the exchange rates to rise.
As predicted, the rates begin to rise and then you decide a favorable rate at which you plan to sell your Euros to get a hefty profit. Supposing the Euro rises to 1.5090/93. Now, to realize your profits, you sell 100,000 euros at the current rate of 1.5090, and receive $150,900.
You bought 100k Euros at 1.5030, paying $150,300. You sold 100k Euros at 1.5090, receiving $150900. That's a difference of $600 or in other words, you successfully earned a profit of $600.
Return on Investment = $600

Always learn a lesson from the Forex Indicators, keep a watch, think long term and then take a step.

STEP 3:

MarketForex does e-trading using high end MarketForex softwares. Easily accessible and user friendly, they have a simple operating process. For instance, the currency pair to be bought or sold can simply be dealt with, by clicking on the sell or the buy key, placed in front of that currency.
After the deal to be done is selected, a quote is then displayed by the software, making it easier for the user to keep track of the records. Also, MarketForex software provides some attractive powerful features such as account details of the holder, like balance, leverage and margins, along with stop/limit orders.
The trader also has the option of selecting various other currency pairs for trading purposes. Before investing always analyse the forex market with various types of forex analysis.

How to earn in Forex

Forex, where the commodity to be traded is currency, and not stocks and shares, is a trading market which gives its investors, returns in the form of the relative value of one currency exchanged against another. Forex trading is therefore, always dealt in currency pairs with the major currency pairs being Euro/US Dollar (EUR/USD) and US Dollar/Japanese Yen (USD/JPY), to name a few.

And it is with concurrent buying and selling of currencies that the trader hopes to make a profit on favorable exchange rate fluctuations. Exchange rates are always fluctuating, going down as well as up, within seconds and the whole art of trading lies in perfectly foreseeing the trend of the variation between two currencies.

But, how do you make money in such a competitive and incessant Trade market?

Well, here is an example to illustrate how…
Supposing the current bid/ask price for EUR/USD is going by the rate of 1.5027/30, giving you the option to buy 1 euro with 1.5030 US dollars or sell 1 euro for 1.5027 US dollars. Now, if you feel that the Euro is underrated against the US dollar, you would opt on buying Euros, selling your dollars at the same time. So you buy 100,000 euros by paying 150,300 dollars. You can then start analyzing the market, waiting for the exchange rates to rise. One can also opt in for Spot Forex Trading due to its benefits

As predicted, the rates begin to rise and then you decide a favorable rate at which you plan to sell your Euros to get a hefty profit. Supposing the Euro rises to 1.5090/93. Now, to realize your profits, you sell 100,000 euros at the current rate of 1.5090, and receive $150,900. You bought 100k Euros at 1.5030, paying $150,300. You sold 100k Euros at 1.5090, receiving $150900. That's a difference of $600 or in other words, you successfully earned a profit of $600.

Change and fluctuation, in any trading market is quiet frequent and rapid, especially in the Forex market, where these recurrent changes are also influenced by various other world events and factors like oil prices, interest rates and economic conditions. But with all these rapid fluctuations going on, the main aim of any Forex investor still remains on making profit. Every trader is predicting and waiting for the value of the currencies to change in his favor. You can also learn more about the Positions in forex

Why Trade Forex

Why opt for Forex trading?

With more than $1.5 trillion USD being traded daily, the foreign exchange market has managed to become the world's largest financial market, over the last three decades. With the large minimum deal sizes and rigid financial requirements, the Forex market, till recently, was not explored by the common trader or individual investor. But now the average investors can also engage in Forex trading. Some of the advantages of Forex trading are as follows:

24 hours trading
Forex gives its traders a 24 hour trading opportunity. Being a Forex trader, you can trade 24 hours a day from Sunday 5:00 pm (ET) to Friday 4:30 pm. This gives traders an opportunity to trade according to their convenience, going by their own schedule and also a chance to react instantly to any breaking news of the markets.

High levels of liquidity
Also, acting as a huge attraction is the high liquidity. With almost 90% of all the currency transactions consisting of 7 major currency pairs, helps these currencies display price stability, smooth trends, narrow spreads and high levels of liquidity. This liquidity mainly comes from the banks which offer cash flow to companies, investors and market players.

No commission
With “free of commission” trading, Forex trade lets you keep 100% of your trading profits. This makes Forex trading even more attractive as a business opportunity, especially for those who want to deal on a regular basis.

Steady trading prospects
The market is constantly moving and since Forex trading involves buying and selling of currencies, so traders can easily operate in a rising or falling market. This is because, there are always trading prospects, whether a currency is rising or deteriorating in relation to another currency. So there is always profit potential in the Forex market, whether it’s a rising one or a falling one.

Along with these major advantages, the Forex market also has some other merits such as, Forex trading gives its traders, an opportunity to bigger profits as returns on their invested money. Also, since the market is open 24 hours a day, 5.5 days a week, it gives the investors can make their deals anytime they want to.

With such superior speed of the market, and fine liquidity, even the largest of transactions are conducted within a few seconds. You can study the Advantages and Disadvantages of Forex Trading as well on our website.

Forex Basics

What is Forex?

The largest financial market in the world, Foreign Exchange market, Forex or FX market, all the terms are used to describe the business of trading of the world's various currencies, with more than $2 trillion changing hands every day. Being an international foreign exchange market, Forex is a market where money is sold and bought freely. FOREX was launched in the 1970s, to become the biggest liquid financial market today, dealing in more than hundred times the daily trading on the New York Stock Exchange.

FOREX is a perfect market to invest in, as it is free from any external control and free competition. Mostly, all Forex trading are tentative and unlike the stock market trading, the Forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. The trading takes place between the two dealers, either over the telephone or through Internet, all over the world. The major trading centers are the ones at Sydney, London, Frankfurt, Tokyo and New York, making Forex a 24-hour market.

Forex Trading requires the employing fundamental as well as technical analyses. These analysis help a trader to foresee and determine the development in the price trends of currencies, based on which, he attempts to predict market changes and make profits. Fundamental analysis can be said to use techniques to analyze the value of a state’s currency with the help of its economic indicators, quality markets and political events and associations. Political stability also influences the exchange rate at Forex. Its not just that Forex Trading is intutive, rather its technical

While Technical analysis engages the study of patterns of price trends and movements, making it easier for the trader to predict the path of the future developments in the Forex market. The primary data for a technical analysis are values, be it the highest or the lowest values, the price of opening and closing in a definite period of time, and the amount of transactions taking place. Any factor, be it economic, political or psychological, having little or some influence on the value or the price, has already been measured by the market to be included in the price. We offer some very useful Tips for New Forex Traders.

Forex Brokers IKOFX

Forex Brokers： IKOFX

About IKOFX:
IKOFX has been established for the purpose to help Investor in success of Forex. With the help of latest news feed, and world wide information gathering, IKOFX is aimed to bring online forex trading to the next higher level. During hash time of current economy downfall, forex trading is what the world most needed to boost up the economy.

The IKOFX Company provides services for currency trading on the international financial Forex market. The company's main working directions are: providing qualified investment services aimed at earning speculative profit on international financial trading markets. IKOFX had operating experience and distribute among Asia countries and Middle-east countries. Currently, there are about a thousand of traders are using our services provided.

Website Link ：

Country ：Cyprus
Regulation ：CySEC - Cyprus Securities and Exchange Commission
Introducing Broker (IB) ：Yes
Dealing Desk ：Market Maker (MM)
Trading Platform(s) ：MetaTrader 4 (MT4)
Mobile Trading ：Yes
Pairs Offered 23：
























Type of Spread ：Fixed
Commission / Fee ：No
Maximum Leverage ：500:1 (0.2%)
Free Demo Accounts ：Yes
Minimum Initial Deposit - Mini US $1
Minimum Initial Deposit - Standard US $2,000
Multi-Currency Accounts USD - US Dollar
Smallest Lot Size ：100
Swap Free Accounts： Yes
Account Funding Methods ：Wire • Liberty Reserve • Local Depositor
Scalping： Yes
Hedging： Yes
Gold Trading： Yes

Silver Trading： Yes

Live Chat： Yes
Languages： English


WELCOME BONUS
Every client has a right to receive the Welcome Bonus in the amount of 20 USD/50 USD/100 USD/500 USD to his trading account in case initial deposit balance of a trading account is as following:















* 1 standard lot is equivalent to 10 mini lots.
* example: deposit USD100 you will get USD20 bonus , but cant withdraw the bonus, you must trade up 10 standart lot= USD10 so you can withdraw your bonus now,if not just only can withdraw your USD100 only.



Why Trader Trade in IKOFX:

---

• Minimum Deposit as low as USD 1
• Commissions-Free Trading
• Instant Orders Execution
• Flexible Leverage Up to 1:500
• Swap-Free Accounts
• Competitive Dealing Spreads as Low as 2 Pips

（Local deposit & withdraw not any charges）

（JOIN NOW COMMISSION FREE AND EVERY TRADE GET 20% REFUND)

FOREX PRICE Daily High / Low

Daily High / Low

	Forex Quote Tables

MACD

MACD

is an acronym for Moving Average Convergence Divergence. This tool is used to identify moving averages that are indicating a new trend, whether it’s bullish or bearish. After all, our #1 priority in trading is being able to find a trend, because that is where the most money is made.

With an MACD chart, you will usually see three numbers that are used for its settings.

• The first is the number of periods that is used to calculate the faster moving average.

• The second is the number of periods that are used in the slower moving average.

• And the third is the number of bars that is used to calculate the moving average of the difference between the faster and slower moving averages.

For example, if you were to see “12,26,9” as the MACD parameters (which is usually the default setting for most charting packages), this is how you would interpret it:

• The 12 represents the previous 12 bars of the faster moving average.

• The 26 represents the previous 26 bars of the slower moving average.

• The 9 represents the previous 9 bars of the difference between the two moving averages. This is plotted by vertical lines called a histogram (The blue lines in the chart above).

There is a common misconception when it comes to the lines of the MACD. The two lines that are drawn are NOT moving averages of the price. Instead, they are the moving averages of the DIFFERENCE between two moving averages.

In our example above, the faster moving average is the moving average of the difference between the 12 and 26 period moving averages. The slower moving average plots the average of the previous MACD line. Once again, from our example above, this would be a 9 period moving average.

This means that we are taking the average of the last 9 periods of the faster MACD line, and plotting it as our “slower” moving average. What this does is it smoothes out the original line even more, which gives us a more accurate line.

The histogram simply plots the difference between the fast and slow moving average. If you look at our original chart, you can see that as the two moving averages separate, the histogram gets bigger. This is called divergence, because the faster moving average is “diverging” or moving away from the slower moving average.

As the moving averages get closer to each other, the histogram gets smaller. This is called convergence because the faster moving average is “converging” or getting closer to the slower moving average. And that, my friend, is how you get the name, Moving Average Convergence Divergence! Whew, we need to crack our knuckles after that one!

Ok, so now you know what MACD does. Now I’ll show you what MACD can do for YOU.

MACD Crossover

Because there are two moving averages with different “speeds”, the faster one will obviously be quicker to react to price movement than the slower one. When a new trend occurs, the fast line will react first and eventually cross the slower line. When this “crossover” occurs, and the fast line starts to “diverge” or move away from the slower line, it often indicates that a new trend has formed.

From the chart above, you can see that the fast line crossed under the slow line and correctly identified a new downtrend. Notice that when the lines crossed, the histogram temporarily disappears. This is because the difference between the lines at the time of the cross is 0. As the downtrend begins and the fast line diverges away from the slow line, the histogram gets bigger, which is good indication of a strong trend.

There is one drawback to MACD. Naturally, moving averages tend to lag behind price. After all, it's just an average of historical prices. Since the MACD represents moving averages of other moving averages and is smoothed out by another moving average, you can imagine that there is quite a bit of lag. However, it is still one of the most favored tools by many traders.

Bollinger Bands

Bollinger Bands

Bollinger bands are used to measure a market’s volatility. Basically, this little tool tells us whether the market is quiet or whether the market is LOUD! When the market is quiet, the bands contract; and when the market is LOUD, the bands expand. Notice on the chart below that when the price was quiet, the bands were close together, but when the price moved up, the bands spread apart.

















That’s all there is to it. Yes, we could go on and bore you by going into the history of the Bollinger band, how it is calculated, the mathematical formulas behind it, and so on and so forth, but we really didn’t feel like typing it all out.

In all honesty, you don’t need to know any of that junk. We think it’s more important that we show you some ways you can apply the Bollinger bands to your trading.

Note: If you really want to learn about the calculations of a Bollinger band, then you can go to
www.bollingerbands.com

The Bollinger Bounce

One thing you should know about Bollinger Bands is that price tends to return to the middle of the bands. That is the whole idea behind the Bollinger bounce (smart, huh?). If this is the case, then by looking at the chart below, can you tell us where the price might go next?

If you said down, then you are correct! As you can see, the price settled back down towards the middle area of the bands.











That’s all there is to it. What you just saw was a classic Bollinger bounce. The reason these bounces occur is because Bollinger Bands act like mini support and resistance levels. The longer the time frame you are in, the stronger these bands are. Many traders have developed systems that thrive on these bounces, and this strategy is best used when the market is ranging and there is no clear trend.

Bollinger Squeeze

The Bollinger squeeze is pretty self explanatory. When the bands “squeeze” together, it usually means that a breakout is going to occur. If the candles start to break out above the top band, then the move will usually continue to go up. If the candles start to break out below the lower band, then the move will usually continue to go down.

Looking at the chart above, you can see the bands squeezing together. The price has just started to break out of the top band. Based on this information, where do you think the price will go?

If you said up, you are correct! This is how a typical Bollinger Squeeze works. This strategy is designed for you to catch a move as early as possible. Setups like these don’t occur everyday, but you can probably spot them a few times a week if you are looking at a 15 minute chart.

So now you know what Bollinger Bands are, and you know how to use them. There are many other things you can do with Bollinger Bands, but these are the 2 most common strategies associated with them. So now you can put this in your trader’s toolbox, and we can move on to the next indicator.

Moving Average

Price Smoothies

A moving average is simply a way to smooth out price action over time. By “moving average”, we mean that you are taking the average closing price of a currency for the last ‘X’ number of periods.

Like every indicator, a moving average indicator is used to help us forecast future prices. By looking at the slope of the moving average, you can make general predictions as to where the price will go.

As we said, moving averages smooth out price action. There are different types of moving averages, and each of them has their own level of “smoothness”. Generally, the smoother the moving average, the slower it is to react to the price movement. The choppier the moving average, the quicker it is to react to the price movement.

We’ll explain the pros and cons of each type a little later, but for now let’s look at the different types of moving averages and how they are calculated.

Simple Moving Average

A simple moving average is the simplest type of moving average (DUH!). Basically, a simple moving average is calculated by adding up the last “X” period’s closing prices and then dividing that number by X. Confused??? Allow me to clarify. If you plotted a 5 period simple moving average on a 1 hour chart, you would add up the closing prices for the last 5 hours, and then divide that number by 5. Voila! You have your simple moving average. If you were to plot a 5 period simple moving average on a 10 minute chart, you would add up the closing prices of the last 50 minutes and then divide that number by 5. If you were to plot a 5 period simple moving average on a 30 minute chart, you would add up the closing prices of the last 150 minutes and then divide that number by 5. If you were to plot the 5 period simple moving average on the a 4 hr. chart…..OK OK, I think you get the picture! Let’s move on. Most charting packages will do all the calculations for you. The reason we just bored you (yawn!) with how to calculate a simple moving average is because it is important that you understand how the moving averages are calculated. If you understand how each moving average is calculated, you can make your own decision as to which type is better for you. Just like any indicator out there, moving averages operate with a delay. Because you are taking the averages of the price, you are really only seeing a “forecast” of the future price and not a concrete view of the future. Disclaimer: Moving averages will not turn you into Ms. Cleo the psychic!

Here is an example of how moving averages smooth out the price action.

On the previous chart, you can see 3 different SMAs. As you can see, the longer the SMA period is, the more it lags behind the price. Notice how the 62 SMA is farther away from the current price than the 30 and 5 SMA. This is because with the 62 SMA, you are adding up the closing prices of the last 62 periods and dividing it by 62. The higher the number period you use, the slower it is to react to the price movement.

The SMA’s in this chart show you the overall sentiment of the market at this point in time. Instead of just looking at the current price of the market, the moving averages give us a broader view, and we can now make a general prediction of its future price.

Exponential Moving Average

Exponential Moving Average (EMA)
Although the simple moving average is a great tool, there is one major flaw associated with it. Simple moving averages are very susceptible to spikes. Let me show you an example of what I mean:

Let’s say we plot a 5 period SMA on the daily chart of the EUR/USD and the closing prices for the last 5 days are as follows:

Day 1: 1.2345
Day 2: 1.2350
Day 3: 1.2360
Day 4: 1.2365
Day 5: 1.2370

The simple moving average would be calculated as
(1.2345+1.2350+1.2360+1.2365+1.2370)/5= 1.2358

Simple enough right?

Well what if Day 2’s price was 1.2300? The result of the simple moving average would be a lot lower and it would give you the notion that the price was actually going down, when in reality, Day 2 could have just been a one time event (maybe interest rates decreasing).

The point I’m trying to make is that sometimes the simple moving average might be too simple. If only there was a way that you could filter out these spikes so that you wouldn’t get the wrong idea. Hmmmm…I wonder….Wait a minute……Yep, there is a way!

It’s called the Exponential Moving Average!

Exponential moving averages (EMA) give more weight to the most recent periods. In our example above, the EMA would put more weight on Days 3-5, which means that the spike on Day 2 would be of lesser value and wouldn’t affect the moving average as much. What this does is it puts more emphasis on what traders are doing NOW.

When trading, it is far more important to see what traders are doing now rather than what they did last week or last month.

SMA vs. EMA

Which is better: Simple or Exponential?
First, let’s start with an exponential moving average. When you want a moving average that will respond to the price action rather quickly, then a short period EMA is the best way to go. These can help you catch trends very early, which will result in higher profit. In fact, the earlier you catch a trend, the longer you can ride it and rake in those profits!

The downside to the choppy moving average is that you might get faked out. Because the moving average responds so quickly to the price, you might think a trend is forming when in actuality; it could just be a price spike.

With a simple moving average, the opposite is true. When you want a moving average that is smoother and slower to respond to price action, then a longer period SMA is the best way to go.

Although it is slow to respond to the price action, it will save you from many fake outs. The downside is that it might delay you too long, and you might miss out on a good trade.



SMA
Displays a smooth chart, which eliminates most fakeouts.
Slow moving, which may cause a lag in buying and selling signals.
EMA
Quick moving, and is good at showing recent price swings.
More prone to cause fakeouts and give errant signals.


Pros:
Displays a smooth chart, which eliminates most fakeouts.
Quick moving, and is good at showing recent price swings.
Cons:
Slow moving, which may cause a lag in buying and selling signals.
More prone to cause fakeouts and give errant signals.



So which one is better? It’s really up to you to decide. Many traders plot several different moving averages to give them both sides of the story. They might use a longer period simple moving average to find out what the overall trend is, and then use a shorter period exponential moving average to find a good time to enter a trade.

In fact, many trading systems are built around what is called “Moving Average Crossovers”. Later in this course, we will give you an example of how you can use moving averages as part of your trading system.

Time for recess! Go find a chart and start playing with some moving averages. Try out different types and look at different periods. In time, you will find out which moving averages work best for you. Class dismissed!




Summary

•A moving average is a way to smooth out price action.
•There are many types of moving averages. The 2 most common types are: Simple Moving Average and Exponential Moving Average.
•Simple moving averages are the simplest form of moving averages, but they are susceptible to spikes.
•Exponential moving averages put more weight to recent prices and therefore show us what traders are doing now.
•It is much more important to know what traders are doing now than to see what they did last week or last month.
•Simple moving averages are smoother than Exponential moving averages.
•Longer period moving averages are smoother than shorter period moving averages.
•Choppy moving averages are quicker to respond to price action and can catch trends early. However, because of their quick reaction, they are susceptible to spikes and can fake you out.
•Smooth moving averages are slower to respond to price action but will save you from spikes and fake outs. However, because of their slow reaction, they can delay you from taking a trade and may cause you to miss some good opportunities.
•The best way to use moving averages is to plot different types on a chart so that you can see both long term movement and short term movement.