📈 How Prop Traders Use this MA to Stay Ahead of the Curve

Hey Prop Traders, here’s are some valuable tips, terms explained and prop firm news for January 16, 2025

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🚀 Prop Traders Use this SMA to Stay Ahead of the Curve

What makes the 100-day simple moving average (SMA) so special? 📈 Why do traders keep coming back to it, day after day, chart after chart? The answer lies in its unique ability to draw a clear line between confidence and chaos—between trending markets and turbulent ones. When prices stay above the 100-day SMA, it’s a signal that the bulls are firmly in control, steadily building uptrends and buying every dip. 🐂💹 But when prices slip below that level, the terrain gets rough. Downtrends emerge, volatility spikes, and the market can quickly spiral into panic. 📉⚡ This average isn’t just a technical indicator—it’s a reflection of where sentiment shifts and trends are born.

In the world of prop trading, the 100-day SMA takes on even greater significance. Prop traders often operate with firm risk constraints and are acutely aware of drawdown limits. Above the 100-day SMA, the market tends to move in more predictable, orderly uptrends. This allows prop traders to set wider stops and aim for broader profit targets without the constant fear of sudden reversals. With the trend in their favor, they can relax into trades and let the market naturally carry them to their targets. It’s not about being careless—it’s about recognizing when the conditions allow for a more forgiving approach. 🛠️📊 Some prop firms, such as Axi Select, have fewer trading restrictions and no strict consistency rules. This gives traders greater freedom to adapt their strategies without facing the risk of breaching the rules, providing a more flexible environment that many traders appreciate. 🌟

Below the 100-day SMA, however, things change dramatically. Here, the prop trader must adapt quickly because swift, sharp reversals are more likely to occur. The lower the price sinks below the SMA, the choppier the market becomes. In these situations, tighter risk management is crucial. Exiting part of a position early, rather than waiting for the trade to fully develop, can be a prudent move. By reducing exposure, traders protect their capital from the higher drawdown risks that come with trading in turbulent conditions. For a prop trader, this isn’t just good practice—it’s essential for maintaining their position within the firm’s rules and safeguarding their trading account. 💼📉

In this EURUSD chart, you can also see how the average true range (ATR)—which measures the average trading range—tends to be higher during downtrends compared to uptrends. 📊 When the market is trading below the 100-day SMA, the ATR typically rises, indicating greater volatility and more erratic price movements. This increased volatility underscores why traders must be more vigilant and flexible when navigating markets below the 100-day SMA.

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