Short-term traders, especially scalping traders, require continuous feedback on short-term price movements in the market to make fast decisions about their positions. Moving averages are perfect indicators for them, as these indicators allow traders to conduct quick yet effective technical analyses in no time.
“Patterns don't work 100% of the time. But they are still critical because they help you define your risk. If you ignore patterns and focus on hunches, feelings, and hot tips, just forget about achieving consistency.” -Ifan Wei
In most cases, traders who focus on 1-minute charts are called scalpers, who are opening and closing several positions during the day. Other short-term traders, such as day traders, for example, mostly use 5-minute and 15-minute charts.
Moving averages are capable of adding reliability to all technical-based short-term trading strategies. Depending on your personal preferences, you can use Exponential Moving Averages, EMAs, Simple Moving Averages, SMAs, or Smoothed Moving Averages, SMMAs. All of these indicators can be very helpful for a 1-minute moving average strategy.
Below, we will discuss each of these indicators one by one and will help you find out which one is the best choice for you. So, follow our comprehensive guide and find the best indicator for 1-minute chart trading and see how they work.
Exponential Moving Average
Exponential Moving Average, simply known as EMA, is one of the most popular moving averages in the market. This trading indicator puts a lot of weight and significance on the most recent price movements, which can be very helpful for short-term Forex traders. Because of the way it works, EMA is known as an exponentially weighted moving average.
The best thing about EMA is that it can be applied to any timeframe on the chart. The best EMA for the 1-minute chart is 7 EMA. This EMA is used to analyze the price movements over the last 7 periods, offering traders very accurate information about the possible short-term price changes in the market.
The EMA can be a great way for traders to understand the general trends in the market. This paired with fundamental analysis, which is a way of analyzing market data (such as central bank reports for example), can be a great help for 1-minute chart traders.
For example, if you are trading the EUR/USD currency pair, you can apply a 7-period EMA to your chart. After this, the EMA will analyze the chart data of the past 7 periods and the indicator will produce buy and sell signals based on crossovers and divergences from the historical average of the market.
Simple Moving Averages
While working on your 1-minute moving average strategy, Simple Moving Average, also called SMA for short, can be a great help. The formula for calculating the SMA is as follows: P1+P2+P3+P4/n. Here, P is the asset's price, and n is the number of total periods, in this case, 4. You can use other periods as well. In most cases, much like EMA, 1-minute traders tend to prefer using 7 periods to get a clearer view of where the market is going.
We can calculate SMA for a specific example. Let's take USD/JPY and its price over 4 periods. P1 - 112.23, P2 - 113.41, P3 - 112.05, and P4 - 113.33. The formula would look like this - 112.23+113.41+112.05+113.33/4=112.8. As you can see, it is fairly straightforward to calculate, however, the SMA indicator will do everything for you, and you won’t have to calculate it on your own. It just helps to understand what is happening behind the scenes, even though most things are automated.
This indicator is a great help for those who want to calculate the asset's average price for a particular period. It can be used not only for short-term trading but for other strategies as well. SMA can be calculated over any timeframe, be it 3 days or 300.
Smoothed Moving Average
Although not as popular as the other two, “Smoothed Moving Average”, aka SMA, is still used by a lot of traders in the market. This is a type of exponential moving average, but it uses a longer period. As the name suggests, this indicator is great for perceiving smoothed data of the market, without having to go through many price fluctuations.
When looking for the best moving average indicator for the 1-minute chart, SMA should not be forgotten as it provides traders with the ability to perceive the general market conditions quickly and easily.
A very interesting thing about this moving average indicator is that along with recent price movements it considers older prices in the data that it uses for its calculations. However, the older data has a minimal impact on the final moving average projection. The best part of this indicator is its smoothing-out function. It is a great way to find the main trends in the market.
