A trader's case for building belief in the 100 and 200 moving averages

Having faith in something is essential, whether in markets or in life.

That belief could be placed in family, religion, or, for an athlete, oneself and the team during tough times.

Traders also need this self-confidence, which naturally raises the question of its origin.

My own approach begins with a coherent trading method. It needs to be visible, comprehensible, and repeatable, allowing risk to be defined, constrained, and accepted.

This conviction underpins my belief in technical analysis, which forms the core of the training I offer on InvestingLive.com.

More specifically, traders require trusted technical tools, and that trust needs a foundation. The aim is to verify that these tools "do what they are supposed to do"—checking if the price behaves at a level, whether a break generates momentum, or if a failed break provides insight.

The two I rely on are the 100- and 200-period moving averages.

The reason for choosing them is straightforward.

I did not select them following a best-fit analysis or an artificial intelligence recommendation for maximum profitability. While enough data can probably be mined to show a 62-period average was optimal in some period, my objective was tools that are understandable, observable, and applicable in a consistent manner.

My initial interest came from a simple observation: discussions of technical analysis on business television frequently mentioned the 100- or 200-period moving average. I took notice.

What sustained it was seeing actual price action around those thresholds.

I eventually saw how they interact. Moving past one average signals a potential change in bias, while breaking the second can confirm it. If the price fails to hold the break, it shows that buyers or sellers had an opportunity they missed.

Convergence of the two averages alongside price oscillation between them suggests a trendless market, putting me on watch for the next significant move and whether it can be sustained.

All of this constitutes valuable data.

Trust in a tool is not a guarantee of perfect performance. It is about grasping its message and accepting when the price invalidates your thesis. A moving average provides a benchmark for that judgment.

I elaborate on and illustrate these concepts in my book, Attacking Currency Trends, as well as in my work at InvestingLive.com. The principles are applicable beyond currency markets.

The first aim is simply exposure. The larger objective is fostering a solid enough grasp to identify good entries and handle risk when chances appear.

I use these moving averages in conjunction with trendlines, swing areas, and Fibonacci retracements. There is more nuance to the approach.

It serves as a foundation for grasping the trust I place in them.

Observing price behavior around these levels, identifying what a sustained break looks like, and interpreting a failed one can all build conviction through direct visual evidence.

This is how faith becomes integrated into a trading routine.

Having something to believe in is non-negotiable.