What’s My Average?

Sam Evans

If you have been a regular reader of these articles over the years, you will know that part of Online Trading Academy’s unique offering, is that we follow a strict rule-based core strategy. While the variety and the vast majority of other educational material available today will focus on traditional theories of technical analysis, we like to focus on the most important factor of market trading: price. When you’re trading price, you need to understand that the rules of supply and demand are paramount in trading consistency and ongoing success. The only way to recognize true areas of supply and demand on a price chart at an objective level is by understanding what institutional order flow is and how it works in the FX markets.

Forex market

All of the major institutions have to use every tool at their disposal to build their positions and these positions are of a very large size, much larger than any retail trader would be putting into the marketplace. When you can see this buying and selling activity and you know what its picture looks like on a price chart, you will understand what the true areas of supply or demand look like. You can find out more about this in a previous 2 part series of articles I wrote on the subject, “Why Supply and Demand?”  Taking a look at these articles will give you more of an idea as to how we understand what institutional trading activity looks like when we analyze our charts. I suggest checking these out if you’ve not already done so.

With this in mind though, I do get many questions from students about the use of technical indicators and if I actually do imply them in my trading activity and which are my favorites. I will tell you exactly what I tell them, in that I do respect technical indicators, however I respect price much more. I’ve never been a fan of anything that is too complicated to use on a chart and which may confuse me when I’m trying to make a decision as to whether or not to be a buyer or seller. Let’s face it; it’s hard enough without too much other confusion! There are times however when technical indicators can be used and can also be quite helpful to us if we know how to use them in the correct manner. I would always advise any student of the market that if they are going to start using technical indicators, they should start by employing the simple ones that will offer them the most dynamic uses to help their trading. The first one which always springs to mind, is the Moving Average.

The reason why I like moving averages is because they’re probably one of the oldest of all of the technical indicators, plus they also are based on logic that is undeniable. They show us the average price and by understanding the average price, we can gauge whether or not prices are cheap or expensive. Without knowing the average we can never really tell when anything is high or low. Moving Averages are also objective, in that the chart software will draw them for us. This means that we can’t draw them incorrectly and that what we’re seeing is the same data that everybody else is, thus aiding the potential of the self fulfilling prophecy, which is not I might add, something I rely on but it is something that can help from time to time.


This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.