Moving averages get criticised for lagging. That's fair if they're used as entry signals on M1. Used for bias only, a simple stack can be quite useful.
A common setup:
- 20, 50 and 200-period moving averages on M15.
- Bullish bias when 20 > 50 > 200 and price is above the 20.
- Bearish bias when the order is reversed.
- No bias (range) when they're tangled.
Then on M1, only take entries in the direction of the bias, using levels and price action for timing. In a tangled state, either range trades only or no trades.
Why this works for some traders:
- It's a simple filter that reduces counter-trend trades.
- It's objective and quick to check.
- It doesn't pretend to give exact entries.
Weaknesses:
- It switches late at turning points.
- On choppy days, the stack flips back and forth.
Some traders use only the 50 on M15 as a single line: above it look for longs, below look for shorts.
Do you use moving averages for bias? Which periods and timeframe?
A moving average stack for bias only, not for entries
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FXS London Scalper
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A moving average stack for bias only, not for entries
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