Hello and welcome to CantosCharts Masterclass. I'm Sandy Jadeja, Chief Market Strategist for CMS FX.

Thank you for joining us in our educational series and today we're going to continue our educational series, but we're going to delve into technical indicators. Now there's quite a lot to learn in technical indicators, but today we'll start off with moving averages and as always, this is simply for education and information purposes only.

So technical indicators, they're basically mathematical representations of market patterns and market behaviour. Technical indicators can be used to help enter and exit trades.

Now there are five key important points that I would like you to focus on about technical indicators and the first being that price itself is the most important indicator. When we start introducing technical indicators along with price, you have to understand that they are classified as secondary usage.

Now technical indicators are generally lagging and that's simply to say that price will move before the technical indicator will give you a key signal. That's not the case for all methods of technical indicators, but it certainly is if you're using technical indicators as standalone.

Then, of course, they can be used to help spot the trend and in many cases, divergence against the main trend and of course, reversals in some cases.

Now there are many types of technical indicators. In fact, you will find that there are more than 100 technical indicators. Here with Cantos we're going to focus on the key main technical indicators that should help you in your analysis and of course, there is no Holy Grail or perfect setting and that's so important to remember, that there is no point just spending time on finding that exact key setting to find the best entry or exit method.

Now, take a look at this. Very simple. What is this market doing? It's quite clear. This market is moving upwards. But that's telling us simply by looking at this technical indicator.

What about this one here, what is the market doing in this particular case here? Well it traded sideways and then started to descend towards the downside. So this really is moving towards the downside. It's bearish and it's falling.

Moving averages are the most widely used indicator and there are three key type of moving averages. There's the simple, there's the exponential and then there's the weighted moving average.

The simple moving average gives equal weight to each price point over the specified period. The weighted moving average however gives more emphasis to the latest data that is used in the technical theories.

An exponential moving average is another way of weighting the more recent data and an exponential moving average multiplies the percentage of the most recent price by the previous periods of the moving averages.

So here we are going to be looking at the simple moving average. Now what is a calculation of moving average? Let's take for example the closing price over five days. So for example, here I've give you 10, 15, 20, 25 and 30. So quite simply we're going to add these together and that will five us a price of 100 and then we divide the 100 of the number of periods which is five. So right now we are getting an average of 20 using this data.

Now, this is going back to that earlier chart that I showed you. What I didn't show you was the actual market. What I did show you was this blue line which was the moving average and straight away we could see that there is an uptrend. So in this particular instance here, this market is moving towards the upside.

In this example, again, taking into consideration that previous line that I showed you, that was the technical indicator and that was the moving average pointing towards the downside. So generally, this market is heading lower. So the moving average is quite key in pointing out what the current average trend is.

Here, of course, the market is moving sideways, so there's no real trend in the market. It's just moving up and down not giving us a really clear bias as to what the market is going to be doing. This is where the moving average can fail in many instances. So moving averages can be used as a reference point for entries and exits in a very, very simple way.

So let's take, for example, this particular chart. What do we have? We know that the market is moving towards the upside. The trend is high. We've got higher highs and higher lows. If we entered the market at this particular point here and then exited here, had a second entry followed by a second exit, the result on this particular trade would have been a gain of 818 points and a loss of 57 points. In the downtrend however, we had a loss of 48 points if we had taken a short position and then of course we had a gain of 271 points by taking the second short position. So we entered here, exited here for a loss, we entered here and exited at this point for a potential gain.

So moving averages can be used to determine the near term trend as well as used to enter and exit a market at any particular point.

In the next educational series I'm going to teach you how to look for very specific entries and exits.

In the meantime, have a great trading week. This has been Sandy Jadeja at CantosCharts Masterclass.