“What is the difference between blue SMA and red SMA?”
In my previous videos, there are times where I would only use Simple Moving Average (SMA) to analyze the market. And the question here is – What are the differences between the SMAs I have on the chart?
SMA calculates the average price movement by specified period of time. For example, when the parameter of a SMA is set to 7 and the trader is trading with a 1 minute chart. In this case, the SMA is calculating the previous 7 minutes of price movement.
Let’s put it in an easier way. The shorter period the SMA, the closer it stays with the candlestick, and more sensitive it is to price changes.
The answer to the question at the beginning, the difference between the red and blue SMA is that they are set with different parameter.
And in fact we are using the crossover of the blue and red SMA to spot timing to enter the market, which when these 2 SMAs crossover, it indicates a confirmation of a direction change in price movement.
SMA is one of the most basic indicators though it’s has been one of the most popular indicators of all time. Take a look at this video to find out more about the SMA strategy!
SMA crossover: https://youtu.be/FzK4u_oASRU
Come and talk with me if you have any question!