In forex, the moving average is the average of successive currency pair prices over a given number of periods.

The basic plan is smooth out the noise on a chart and therefore to give a clearer picture of the trend, if any. Everything else being equal, a 14-period MA should give a smoother ride than a 7-period MA.

The ‘price’ of a time period is usually the closing price – although it’s possible to take the midpoint of the high and the low over the period, which in theory would be more accurate, in practice, not so vital…
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Following on from a previous post on the Williams Percentage Range forex indicator here’s a comparison with the %R and the standard Stochastic indicators Stoch (8,3,3) simple moving average.

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Williams Percentage Range, or Williams %R is a momentum indicator similar to Stochastic indicators and again is concerned with determining overbought and oversold levels.

%R = (highest high over x periods – close) / (highest high over x periods – lowest low over x periods) * -100

The range is from 0 to -100 with above -20 = overbought, and below -80 = oversold.
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Found this interview with Tom DeMark while surfing around – DeMark has always stressed:

• “My method is anti-trend, contratrend, it’s pattern recognition and price exhaustion.”
• “Make certain you’ve made your technique objective – it should be a definitive process.”
• Although, also – “Good discipline, a knowledge of limitations and good money management are more critical than the system or indicator.”

He also says that he retired on leaving business grad school – markets & investment have been a retirement hobby ever since, and not a proper job at all… Think I know what he means, sort of….

Charts can do this to us traders…

Or, more accurately, indicators can do this… Having just seen a nice march upwards, along the top Bollinger boundary, there’s a bit of a squeeze, and now the trend is into its third (Elliott?) wave. Everything worth consulting says go long, so it’s buy….
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There’s a set of forex chart patterns which suggest continuation – that is, they are against an established trend, which may resume after their completion.

The flag looks like a rectangle directed against the trend, over a period of 5 to 15 candlesticks. Here’s an example in a bear market

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