Moving Average

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A moving average is simply an indicator that follows the market action by taking the average closing prices of a given number of periods.

The way to use Moving Averages in your trading is to identify the trend.

Plot a moving average on its chart. Whenever the market price is above the moving average, it’s a signal that the trend is UP  (and so you should buy) while whenever the market price is below the moving average, it’s a signal that the trend is DOWN (and so you should sell)

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The smaller the periods included the faster will the Moving Average will respond to the Market Price movement and catch the Trend faster but it will also be sensitive to sudden price movement.

The bigger the period you select the more reliable will the symbols be but it may be a bit too late till you get notified.

An Exponential Moving Average puts more weight on recent values as opposed to the Simple.

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