If you are scalping forex you will normally be trading on a 1 minute chart or 5 minute chart. So naturally you may ask the question what is the best moving average for a 1 minute or 5 minute chart. The answer really depends on what exactly you are looking for the moving average to tell you.
Longer settings on a moving average will show you the overall direction that price is moving. You can usually see this with your eyes by watching the lows or highs, but a moving average will give you a more visual guide.
Shorter settings can usually be combined with 2 averages. This would be a moving average cross, which is a popular scalping technique for daytrading. Here I show you two quick examples of each and how they should be used in your trading system.
Best Trend and Support / Resistance Moving Average
On a 1 minute chart the 200 EMA is a good guide for direction, but also as a possible place from where a bounce may happen. This is not some hocus pocus magic, it’s simply because it is the best moving average for this and many many traders have it loaded on their charts. The more people who are watching it, then the higher the possibility that people will be trading around it.
You can see here below that the price consolidated and was hanging around the 200 EMA a few times before the bounce higher finally came. The 200 EMA was also sloping upwards, indicating an upward trend.
Best 1 Minute Moving Average Crossover
There is no one size fits all with a moving average crossover. But the best ones for 1 minute charts will usually be fast settings to adapt to short term changes. Here I have shown you the 4 EMA and the 8 EMA. This looks a good fit in a fast market. But the issue with these settings are that in choppy areas, it can cross back and forth many times. You really need to combine these indicators with price action (support/resistance) or another like RSI or Stochastic.
Hopefully you can take these settings, or maybe adjust them slightly to find a suitable system that you can use for scalping forex. Also you will need really low forex pair spreads. Try reading our IC Markets review to understand why they are a good option for scalping forex.