One of the indicators you will come across at Olymp Trade is the SMA. This stands for the Simple Moving Average. It is calculated by summing up the last closing prices and dividing the outcome by the number of timeframes in which these candles appeared. The purpose of using the SMA is to identify the price direction.
In this guide, I want to show you how to add the SMA to your chart and how to trade with it on the Olymp Trade platform.
Key Takeaways🔑
| →The SMA is a helpful tool for identifying price direction on the Olymp Trade platform. |
| →It can be used in conjunction with other indicators for more accurate predictions. |
| →Successful use of the SMA requires identifying optimal entry points for trades. |
Contents
Configuring the SMA on the Olymp Trade platform
The Simple Moving Average can be applied on any kind of the Olymp Trade chart. I do recommend, however, setting the Japanese candlesticks chart. It is just that this type of chart is easier to analyze, particularly in combination with the SMA.
Once you are logged into the Olymp Trade account, click on the chart type feature and choose Japanese candlesticks.
The second step is to click on the graph tools feature and choose the SMA from the available trend indicators.
You will find a small pen icon close to the name of the indicator (SMA) in the top left corner of your chart’s window. Here you can adjust the period of the moving average, the color, and thickness.
The best choice of the chart timeframe would be 1 minute. This way the price chart will be easy to read and you will be able to open the positions for a duration of 1 minute and more.
Using the SMA in trading on the Olymp Trade platform
The most important thing is to find the perfect spots to enter the positions that will bring you a profit, and not a loss. We will use the above chart to discuss this issue.
You can notice a few situations where the SMA10 was moving below the prices. At some point, it cut the bearish candle across. After that, it runs above the prices. The moment the SMA10 crosses the bearish candle is a signal the downtrend is coming so when the candle is fully developed you should enter a sell position. You may hold it between 1 and 5 minutes.
On the other hand, whenever the SMA10 runs above the prices, then cuts the bullish candle across and begins to run below the prices, it means the uptrend is developing. Now is the time to open a buy position. Again, it should last from 1 to 5 minutes.
👍Pros and 👎Cons of Using SMA at Olymp Trade
- 👍SMA is easy to set up and interpret, making it ideal for both beginners and experienced traders.
- 👍It can be used on various types of charts, adding to its versatility.
- 👍When combined with other indicators, it can lead to more accurate predictions.
- 👎SMA is subject to a delay, which may impact its predictive accuracy.
- 👎It requires the identification of optimal entry points, which can be challenging for inexperienced traders.
- 👎SMA may not be the best tool to predict future price movements on its own.
| Factor | Description |
|---|---|
| SMA Usefulness | SMA is primarily used to determine price direction and potential trend reversals. |
| SMA Combinations | SMA can be combined with other indicators like RSI or Parabolic SAR for more accurate predictions. |
| Adjusting SMA Period | The period of the SMA can be adjusted according to the trader’s preference and the duration of the trade. |
| SMA in Volatile Markets | SMA is especially efficient in volatile markets and can be useful during news releases. |
A handful of tips on how to trade with the Simple Moving Average
The SMA is used to determine the price direction and possible reversal of the trend. But bear in mind, this indicator is subject to a delay. That’s why is not the best tool to predict future price movements. Luckily, it can be combined with some other indicators, such as the RSI or the Parabolic SAR, and then you get a much more accurate prognosis.
The period of the Simple Moving Average can be adjusted by your preferences. For trading short-lasting positions, set the indicator’s period for 10. If you would rather open trades that last over 10 minutes, increase the period accordingly. Remember, the higher the period, the longer the delay.
The SMA is highly efficient in the markets that can be characterized as volatile. This is the reason why it is a good idea to use this indicator when some news release is expected.
Trading with the SMA indicator at Olymp Trade is not difficult. Try it right now on your Olymp Trade practice account, while keeping in mind that the market will always have risks. Always be prepared to deal with losses.
Tell us in the comments section below how you find the Simple Moving Average at work.
Wish you success!
🎯 Q&A
- Q: What is the main purpose of the SMA indicator at Olymp Trade?
- A: The main purpose of the SMA indicator is to identify price direction and potential trend reversals.
- Q: Can the SMA indicator be used in isolation for accurate predictions?
- A: While SMA can provide some insights, it is generally more effective when used in conjunction with other indicators like RSI or Parabolic SAR.
- Q: How can traders adjust the SMA period?
- A: The period of the SMA can be adjusted in the indicator settings, according to the trader’s preference and the duration of the trade.
- Q: Is the SMA indicator effective in all market conditions?
- A: SMA is particularly efficient in volatile markets and can be useful during news releases.
- Q: What are some challenges of using the SMA indicator?
- A: One challenge is that the SMA is subject to a delay, which may impact its predictive accuracy. Additionally, it requires the identification of optimal entry points, which can be challenging for inexperienced traders.