MA Whipsaws in Range Market - MA Whipsaws in Range Markets

Trading Strategy for Moving Averages Indicator - Range Markets Trading Systems

Moving average whipsaw is a fakeout signal that is generated by the Moving Average indicator, when this indicator gives a signal in one direction - then the indicator quickly turns around and gives a signal in the opposite direction. This is called a moving average whipsaw signal.

The moving average indicator is a useful chart indicator to trade with when a trend has formed. However the moving average indicator is prone to whipsaws when the price is trading in range market.

The Moving Average indicator is prone to whipsaws during a ranging market because the price is volatile and keeps moving around the average, causing the moving average indicator to give signals indicating upward trend and then quickly changing to give sell trade signals.

It's for this reason that the Moving average indicator should not be used to trade forex in a range based market.

Ranging Market and Whipsaws - How to Trade Forex in a Range Market

This is why it is best to combine this moving average indicator with other indicators when generating signals to trade currencies with.

By combining the moving average indicators a trader will confirm the signals generated by the moving average indicator with the other indicators - if the other indicators give a signal in the same direction as the signal given by the moving averages then a trader can open a trade in the direction given by the moving average indicator and the other indicator used to confirm the signal given by the moving average indicator.

By combining the moving average indicator with other indicators a trader can come up with a system that will help them identify which signal that is generated by the moving average is likely to be a whipsaw and which signal is likely to be more reliable.

A trader should only open trades if the signals generated by the moving averages are in the same direction as that which is indicated by the other additional indicators.

Good trading indicators to combine moving averages with are RSI indicator & MACD indicator.