So what is moving average so moving average is an indicator that you know seems to follow the price. So if you see the price heading up over time right, your moving average will be pointing up higher. If you see the price heading down lower, you can expect your moving average to be pointing down lower as well, and why is that? And that's because of the math behind it. So let me explain so it's nothing too complicated.

It's going to be pretty simple. I promise you so the math behind moving average, or rather the idea behind it, is that moving average calculates the average price over x number of period. So, let's say if you're looking at a daily time frame - and you have a five period moving average. What this does is that it calculates the average price over the last five days since it's a five period moving average.

So let me show you how this works. So, let's say you're looking at the chart - and you have you know, bars like this. This is the first candle. This is the second candle.

This is the third candle. This is the fourth and let's say this is the fifth right five candles in the chart and let's say the closing price of this five bars. Is you know one two, three four dollars and then five dollars? So so this right, the first candle, means the price closed at one dollar. Second, candle means the price closed at two dollar.

This one closed at three dollars. This cannot close at four dollars and this cannot close at five dollars. So let's say you overlay this chart with the five period moving average all right. What will the value of your moving average be? Well, it's gon na be pretty simple right.

What you're gon na do is to add the total right of this closing price, so one plus two plus three plus four plus five and you divide by five since you're, calculating the average price over x number of period. Our x number of period in this case is a five period moving average, so you take one plus two plus three plus four plus five divide by five, and if you do that, okay, your answer will be along the lines of uh, divided by five equals to Three dollars: how do i know that you can just pull out your calculator and you'll? See that, though this average of this uh five candle, the average price, is three. So let's say we add one dot over here right at this price point i'll explain what this dot means shortly. So now, let's say a new candle has fall right.

Price is closed higher on this six candle over here and, let's say it closed at six dollars. Now, what is the new five period moving average value, so what you're gon na do is you will now okay, take the most recent prices right over the last five candles, so one two three four five, so you take two plus three plus four plus five plus Six, you divide by five and you get the value of four. Now you might be wondering hey. We know what about this first, candle number one well, we'll ignore it, because we are calculating the five period moving average.

We are just looking at the five most recent candles, so in this case right we have six candles over here. We will ignore this one, the oldest one. So this is the five most recent candles from here all the way to here. So again we just calculate the average of this uh total value here, two plus three plus four plus five plus six divide by five and you'll, get four dollars.

And what you'll do is, you add, let's say, draw another dot over here. So if the price keeps you know going up higher, what you can do is you realize that your dots gets higher and you connect the dots it will appear as a moving average on your chart and that's how it works? Okay, so hopefully you got some aha moment down here, okay, so this is just some simple calculation which i've you know i shared with you earlier so now. The key thing is this right: how do you actually use moving average to define the market structure? So, let's find out so for an uptrend. What you can do is when the price is above the 200 period moving average, you can say that the market is in an uptrend.

So let me give you an example. So let me just let me go through the stuff here. First in a downtrend right, it's when the price is below the 200 period moving average. So some of you might be wondering hey right now why 200 period moving average? Well, there's really nothing magical about this, but when we use 200 right it will take into consideration right 200 bars on your chart.

So it will give you like a long-term guideline to whether this market is hitting higher or lower. So this is kind of a way to help you define the long-term trend and, finally, the market is in a range right when the price chops up and down the 200 period moving average. So let me just show you so, for example, euro against the usd i'll add in the moving average here. So if you don't want, if you're wondering how to do it, i just go to indicators.

You look for moving average right. You can see over here. Just click on this and the line will appear so in this case i already have it on my chart and if you look at euro against the us dollar, you can see at this market. We can see that this market is in an uptrend.

The price is above, the price is above the 200 period, moving average. Now, if you look at the dollar against the south african rent, you can say that this market is in a downtrend, because the price which is here is now below the 200 period moving average. And if you look at this one over here pound against the canadian dollar, you can see that this market is in a range because the price or you can see it is chopping up and down the moving average okay. So we can conclude that this market is in a range and that's how you can use moving average to help you define your market structure.

Okay. So let's do a quick recap. Number one market structure helps you to define the current market condition. So you know whether to be buying selling or staying out of the markets.

So, for example, if you see a market in an uptrend, what do you want to be doing? Well, you want to look for buying opportunities. That's the path of least resistance. If you see a market in a downtrend, what should you be doing? You should be looking for selling opportunities, because the market is heading down lower over time and there's a good chance. It will continue to hit down lower.

And finally, if you see the market is in a range, then you can look, you know, buy low and sell high, buy near the lows of the range and sell near the highest of the range and i'll explain how you can do all that in the later Section, but for now just understand you know what is market structure and how it can you know help you alert you right to what you should be doing at any one point in time, so market structure consists of uptrend, downtrend and range. You already know this and finally, you can use a candlestick chart or moving average to help you define market structure. So now, at this point right, you have, you know, learn market structure, but it's just the first step, because a market could be in an uptrend, but it doesn't mean you want to blindly. You know hit the buy button because the market could be getting ready to make a pull back or even a complete reversal, and the last thing you want to do is to buy high and sell low.

So this is why it pays right to be watching right for your areas of value on the chart. So you can better time your entries, and this is what we'll cover next. You.