Generally, in an uptrend, the shorter-period or faster moving averages will remain above the longer-period or slower ones. You'd expect that because the slower moving averages will take longer to react to the trend. In this four-hour GBP/USD chart, for example, during the uptrend the 10 MA is at the top, followed by the 20 MA then the 50 MA.

In downtrends the reverse is generally true, as shown in this daily EUR/USD chart, where the 50 EMA is at the top, followed by the 20 EMA and 10 EMA

Notice how the 20 EMA and 10 EMA touch in the middle of the trend, so this method - like all technical analysis - is not foolproof. However, when combined with other techniques such as trend lines and channels, it can be useful way of identifying the general direction a market is headed.A

Let's go back to the four-hour GBP/USD chart, but this time removing the 50 MA:

As we've seen, the 10 MA is usually above the 20 MA in an uptrend, but below it in a downtrend. The points where the moving averages cross therefore, can be useful places to enter and/or exit trades. In general, you would go long when the shorter term MA crossed above the longer term MA and reverse your position when the longer term MA crosses above the shorter term MA.

If you were to follow this strategy for the uptrend above, you would've gone long on 9 June when the MAs crossed, then exited the trade on 21 June when they crossed again - in this case making a healthy profit.

Note that this method should only be used when the market is in a strong uptrend or downtrend. If the market is consolidating or trending sideways, it's likely you will be hit with a large number of crossover signals which are unlikely to be profitable.

Just like trend lines or channels, moving averages can be used as dynamic support and resistance levels, with the added benefit you don't have to draw them yourself. Let's have a look at the daily EUR/USD chart again with just the 10 EMA added this time.

As you can see the 10 EMA resistance level held for most of the downtrend. However, there was a point in mid-September where the price broke quite significantly above the line. This turned out to be a fakeout as the downtrend continued towards the end of the month and into October.

It's for this reason that many traders add more than one moving average to a chart. If we include the 50 EMA as well, we can see that - although the 10 MA level was broken - the 50 MA level held during that brief rally in September.

Adding the 50 EMA also throws up a strong crossover signal at the end of a period of consolidation in November and early December, just before the market goes into an uptrend.

The same principles of momentum apply to driving cars and price action. When the price rises, the price uptrend accelerates and the momentum indicator also rises.

When the price is rising and the indicator is falling, the upward price trend decelerates. When prices fall and momentum indicators fall, the price downtrend accelerates. A price downtrend decelerates when the price falls and the indicator rises. Therefore, momentum indicators must be applied along with moving averages.

The Momentum Oscillator can be located in one of four quadrants:

Upper quadrant (u): The oscillator is below the zero line and rising.

Advance quadrant (a): The oscillator is above the zero line and rising.

Lower quadrant (d): The oscillator is above the zero line and is falling.

Terminating quadrant (t): The oscillator is below the zero line and is falling.

The indicator is shown above in idealized form (bell curve). The same oscillators are applied to monthly, weekly or daily charts to determine long-term, medium-term and short-term momentum. its length is

A time axis that distinguishes three time ranges.

We combine three momentum indicators to track the three investment ranges discussed
Monthly or long-term momentum indicators track long-term trends, roughly (10-month rate of change); weekly, medium-term, or medium-term momentum indicators (roughly 10-week rate of change) track medium-term trends, and daily or short-term momentum indicators (roughly 10 daily rate changes) to track short-term trends.

We then compare the momentum indicators with the moving averages that determine the strength trends and evaluate the most likely future paths of these trends.

When is the highest return on investment realized, investors start to buy at the bottom of the momentum, and increase their positions when the price is confirmed, and the upward trend of the momentum indicator rises to the moving average. Likewise, investors should start selling if the momentum indicator peaks and sells, more so if the price breaks below the moving average. Therefore, the combination of signals given by Momentum Oscillators, Moving Averages, and Support and Resistance should be applied.