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Traders use moving averages to show them where market trends are going and ride on it. On the other hand, Fibonacci ratios exist everywhere in nature, including the markets.
Traders use ratios to identify areas of interest that act as support and resistance levels.
When you combine this indicator with the Fibonacci technical indicator, you get an accurate Fibonacci-based Moving Averages. This determines the trend and can help you identify entry & exit points.
The indicator has five exponentially weighted moving averages with Fibonacci ratios and is applicable to any trading instrument. The best part is, you can use it to trade on higher time frames as well.
Buy and Sell Signals
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The best time to buy is on periods where the short line of the moving average crosses above the long term lines.
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When the short-term moving average line crosses the long-term line, you should be selling.
Exit Strategies
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Place your stop loss either above the high or below the low of the recent swing
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Place your take-profit target above the next key resistance or support level
Conclusion
Without a doubt in my mind, Fibonacci is one of the best tools for technical analysis. Using Fibonacci’s ratios to calculate moving averages is probably one of the best ideas for trading out there.
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