Moving Averages With Candlestick Patterns Can Be A Powerful Combination

Moving Averages are one of the most widely used technical indicators. They are simple, easy to use yet highly reliable. Many manual and auto trading systems use them. Moving averages can be useful when you are looking to confirm a trend. The first rule of thumb when using moving averages is that when the currency pair price is above the moving average, an uptrend is in place. When you combine this with a bullish candlestick pattern you can get profitable entry and exit signals. Similarly, when price action is below the moving average, a downtrend is in place.

Suppose, the prices are trading above the moving average line and you spot a trending candlestick pattern like the bullish thrusting line pattern appearing above the moving average line. This is a good confirmation that the uptrend is firmly in place and is going to continue for some more time. You can safely enter into a long trade.

However, a better method would be to trade with two moving averages instead of one. When you combine two moving averages with candlestick patterns, you get a powerful combination. In this case, the trend will be defined by the location of slow moving average (the one having more periods) relative to the fast moving average ( the one having less periods).

When the slow moving average line crosses above the fast moving average line and starts trading above the fast moving average line, it is a signal that an uptrend in the market has started. It means an uptrend. When this is confirmed by the appearance of a bullish candlestick trend continuation pattern like the thrusting line pattern, you can safely enter into a long trade. You can continue riding the trend till the slow moving average crosses below the faster moving average.

Placing a stop loss when trading with moving averages is a bit tricky as unlike the trend lines, there is no straight line that you can use to place the stop loss. Another problem that many traders face is recognizing the candlestick patterns that signal trend continuation or a trend reversal.

You can use a Candlestick Patterns Recognizer Indicator that can recognize the candlestick pattern automatically and tell you that a thrusting line pattern is appearing on your chart or a neck line pattern is appearing. This way, you don’t have to get confused figuring out the candlestick pattern. Combining candlestick patterns with moving averages can give good entry and exit signals. Get these 3 Swing Trading Systems FREE. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide.