moving average investor

Can one make money being a moving average investor ?

One of the many ways to invest in today's financial markets is through the currency or foreign exchange markets. One of the types of investor or trader who attempts to earn income through the forex or other exchange markets is called the technical trader.

The technical trader uses indicators placed on trading charts. The trading charts are basically historical price records that are static apart from the current bar which is dynamic until the end of the period when a new bar begins.

One technical indicator is called the moving average indicator. The MA comes in many flavours with the simplest being commonly called the " simple moving average " or the SMA.

Read on and see if the information provided in this " moving average investor " hub has any merit.

If it does then you might be tempted to look into managing your own self directed home business as a foreign exchange currency trader.

If you choose to think that the information provided here is not worthy of pursuing then you have lost an investment of time only.

 We mentioned a bar and we mentioned a simple moving average. Each price bar keeps a record of prices. Usually a bar quickly tells you the potential investor what the open, high, low, and close price of any historical period was.

When wanting to compare more the one bar then a moving average is entered into the equation. A moving average calculates the average of two bars or more.

Plenty of deeper mathematical understanding of this can be had through doing a simple moving average search on the net. Luckily as a trader with a trading account on any of the many online brokers you can apply an SMA or many SMA's on a trading chart without doing any number crunching. In other words you add moving averages to a trading chart at the click of a mouse.

You can add for example a 10 bar moving average and a 20 bar moving average to a chart.

The beauty of moving averages is that they cross one another when the underlying price action moves. And in the current financial markets where the price of currencies, stocks, bonds, commodities is set by the open market or in a public auction atmosphere then there is plenty of high volatility and volatility makes for many crosses on the moving averages.

Let me explain my understanding of how money moves in the currency exchange markets.

The " moving average investor " wants to know who is moving average money in the markets ?

They have names like " the ax ", " the guy who lays the line ", "the skin ", " the big money player" and more. The entity moving the average can be a central bank, or even a bunch of investors or traders acting in panic.

Regardless of who the big money is eventually the price of a financial asset moves and sometimes it moves sharply and very fast. Hence the investors warnings about never over leveraging positions and always having a trading plan with a stipulation that protects your losses.

In a sense one could paint a picture of two people moving a two bar SMA while 20 people would be needed to move a 20 period SMA. Somehow it's always the big money that decides which way the price will move.

Any one who has ever watched moving averages in action will tell you that while they provide a hint or a tell if you were to use poker language into the intent of the market they, the SMA's and the crosses they provide by no means are an holy grail for the trader.

In other words moving average crosses are prone to fail just as often as they succeed and being right fifty percent of the time in a game where the investor is charged some sort of fee is in and of itself a losing proposition.

Investing in forex or in any financial market is not a zero sum game so the investor must first make up the spread or the dealer cost before being in the money.

So to even consider making moving average money one as to first be able to either right more than 50 percent of the time or have more money on right decisions instead of more money on wrong decisions.

Does this all sound too complicated ?

It should. Making money is never easy. If it were then everyone would stop chasing pensions and go the route of self directed investor which could lead to true financial freedom with less or even no need for government subsidies in your old age.

So how can one apply money to this " moving average investor " investment concept ?

Yes "cost averaging" is a dirty phrase in the investor's dictionary. Cost averaging is usually synonymous to chasing bad money or throwing good money after bad money. Some people might even say that the QE principles or Quantitative Easing methods currently used by the global banks is a sort of cost averaging. But that's another story that I hope someday someone writes and calls it something like " High Priests of the Financial Vaults : The religion of money. ?

As for using cost averaging with simple moving averages it's a matter of looking at not only one cross but a number of consecutive moving average crosses and then loading up with your investment dollar, little by little.

Moving average crosses happen on all time frames and time frames come in all sizes. On one trading platform a trader can watch the price action on a five minute time frame where the moving averages cross several times a day. On the same platform the same trader might be looking at a daily chart where the moving averages will not cross for day or even weeks.

What does that mean to the potential trader or investor who may want to consider trading as a home business where currencies, commodities, stocks, or any financial asset is the instrument of trade?

It means that longer trends are found on the longer timeframes while shorter timeframes provide many opportunities in the form of SMA crosses.

It means that money management is more important in trading success than the direction of the price.

It means that well managed execution of a trading plan which in this case involves " moving average money " and that dirty term called QE....whoops....called cost averaging can potentially turn a few bucks into a nice retirement nest egg.

Of course it's all just speculation and only the wise investor will know if this " moving average investor " concept holds any merit. And the wise investor can only know if it works by actually testing it further and hopefully testing this idea in a paper trading account or on a very small forex account.

Such are the forex markets of our day and age.

An aspiring forex trader can trade a single dollar on certain trading platforms knowadays. And these platforms are available through more than one online forex broker.

Practice what you preach........I heard that and I will never tell whether I use a method of trading forex with an approach like " moving average investor ".