Moving Averages – Basics

Moving Averages are by far the most widely used and easy to understand forex indicator. They display right on top of your chart and mechanics are very easy to understand – a moving average or MA – is quite simply the average price over a given period.

This is one of the more common Moving Averages – SMA100 – the Simple Moving Average of the close price for the last 100 bars. We have placed the SMA100 over the GBP/USD forex pair on a 4 hour chart.
The simplest form of MA analysis is checking where price is in relation to the MA – is price above the 100SMA? Look to buy. Is price below? Look to sell.

That is, when GBP/USD is above the 100SMA, we will look to buy lows, when it below the 100SMA, we will look to sell highs: