Technical Trading Tips and Techniques by 
(Please click on the accompanying chart to enlarge. Chart courtesy of FX Solutions’ FX AccuCharts.)
I often get asked about different ways one may determine trending conditions, or lack thereof, in the forex market. There are many ways to do it, including trendlines, trend channels, linear regression, slopes of moving averages, the Average Directional Index indicator, simple visual estimation, and more.
One rather reliable method that I tend to use often is called the “correct order of moving averages.” For this technique, I usually use five different exponential moving averages (EMAs), although more or less may be used according to a particular forex trader’s experimentation. The periods of the moving averages may also be varied according to experimentation, but I will generally use the following five EMA periods: 10, 20, 30, 50, and 100. Many traders have been known to choose periods based upon Fibonacci numbers (for example: 5, 13, 34, 55, and 89). Extensive experimentation with the quantity and periods of moving averages helps tremendously in identifying a good set of multiple moving averages that works well for the market being traded.
Once the quantity and periods are identified, trend determination with multiple moving averages simply consists of seeing whether the EMAs are in the correct order at any given time. If the longest period EMA is on the bottom and progressively shorter period EMAs stacked above it, with the shortest period EMA on top, that can be considered the correct order for an uptrend. If the shortest period EMA is on the bottom and progressively longer period EMAs stacked above it, with the longest period EMA on top, that can be considered the correct order for a downtrend. Whether an uptrend or a downtrend is indicated, strategies can then be implemented to enter into trades in the direction of the trend. If the moving averages are NOT in correct order, that is an indication that there is NO directional trend. In this event, one might be well-advised to stay out of trading in that particular currency pair at that particular time, especially if one prefers to trade in the direction of the prevailing trend.
- James Chen, CTA, CMT
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sir after using the correct order of moving avarages,e.g using the 10,20,30,50 and 100.and you fouud that the trend is up.how do you determine your entering point in the direction of the trend.
Why use up to five different exponential moving averages (EMAs) if you can use only two EMAs ? I think most traders only use the best two EMAs for trading experiments. Because using too many EMAs will only waste your time since the results will be confusing. Or maybe you have good reasons for it?
The best way i have found is to look at a 4h chart. If price makes a lower swing high and a higher swing low than the previous high and low then it is range bound. Higher swing highs and higher swing lows signal trending price upwards. Reverse for a down trend.
I think that this method is valuable exceptionally on higher time-frames.
Say, you do M15 trading and the chart seems to be messy for you. You need get a wider scope, a whole picture and you switch to H1/H4 time-frames. Then those Moving Averages show you the trend and MAs can help you detect previous volumes of movement (’a body of candle’) that you can expect in your native TF (said M15 in my example).
Higher TFs helps with ‘the map’; smaller TF can help you with precise timings (’sniping’). Moving Averages serves as a non-linear grid that shows ‘the lines of attention attraction’.
So, MAs in your native TF maybe not so informative as those in higher/smaller TF.
Does anyone use MA in M1 TF at all?
When trading I always use two ema, when the trend is up I place the order for buy position, my question is when I just put the order, all of a sudden the trend is down, what should I do, the stop los has not hit yet!! should I close the order and put order to “SELL” ?? I am a newbie.