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Moving averages

The Zone Trade method is essentially made up of three moving averages:

  • The 50 period simple moving average
  • The 8 period exponential moving average
  • The 20 period exponential moving average

Determine market direction

The 50 period moving average is used to determine the market direction. We will only be looking for short trades when the price is trading below the 50 period moving average and we will only be looking for long trades when the price is trading above the 50 period moving average.

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The 8 and the 20 period moving average will help to determine when to enter the market. The space in-between them form 'The Zone', which is the area on the chart where we will look for an entry into the market.

So, if the price moves into the space between the 8 and 20, then a trade is setting up and we'll look for an entry and whether we go long or short will determine whether the price is above or below the 50 period moving average.

It is prudent to take note of the angle and the separation of the moving averages. A nice angle of 45 degrees and a good separation is usually a good sign of strong trend.

Markets.com

Markets.com
Minimum Deposit$100
Average Spread2,2 pips
RegulationCySEC, FSB
Founded2010

Why

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eToro

eToro
Minimum Deposit$200
Average Spread3 pips
RegulationFCA
Founded2008

Why

Get 12-month Premium Membership for free. Deposit and send us an email to premium@tradimo.com to claim your free Premium Membership.

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