Moving averages are used by many traders to identify trends and ride them. Fibonacci ratios can also be found in nature and in the markets. Traders use these ratios to identify areas of concern as support or resistance. What happens when Fibonacci technical indicators and moving averages are combined? This will give you an accurate Fibonacci-based moving average indicator to identify trends and optimal entry and exit points.
Five exponential moving averages are used to calculate the value of the indicator based on the Fibonacci ratio. This indicator can be used to trade any instrument. However, on longer time frames, higher values are more effective.
Fibonacci-based moving average sell and buy signals
Buy when the short term moving average is above the long term line.
Sell when the short term moving medium is below the long term line.
Exit strategy
Place a stop loss well below or just above the most recent swing low.
Place profit-taking targets above the next resistance or support zone.
Conclusion
The Fibonacci indicator is without doubt one of the most useful technical tools. One of the most innovative trading ideas is the use of the Fibonacci ratio for moving average calculations. It is definitely worth trying.