200-day EMA Forex indicator
200-day EMA (Exponential Moving Average) is my favorite Forex indicator and it’s used by many PRO traders. It’s not just a simple indicator that shows the average price of a currency for last 200 days. It’s also not an indicator I put on my charts together with other moving averages and wait for a cross-over to enter a trade. It’s more than that! I love trading Price Action but I couldn’t do it without the 200-day EMA. Here is how I use it:
1) As a trend identifier – If you see the candlesticks above 200-day EMA, you are in an uptrend. If the candlesticks are below the EMA indicator, we are talking about a downtrend. If the candlesticks are close to EMA, the trend is weak and if the candlesticks are far from the EMA line, we will say that we see a strong trend:
2) As a support/resistance level – Yes, you can draw your own S/R lines, but 200-day Moving Average is used by many professional traders and it can be used a strong S/R level.
NOTE: I also use 100-day EMA for this!!!
3) As a reversal signal – If you see candlesticks move through a 200-day Moving Average, this can be used as a signal that the trend is reversing:
Make sure you use EMA and not SMA (Simple Moving Average) because EMA is more responsive and more accurate.