“Moving Averages

 > Explanatory Article by Marios Kyriakou, MSc Economics


About the author: Marios Kyriakou has a bachelor’s degree in Economics from the University of Cyprus and a master’s degree in Economics from the University of Warwick. He is also a holder of CySEC’s Advanced Certificate in Financial Services Legal Framework and a professional in Online Trading, Forex and CFDs with more than 7 years of experience.

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<Last updated 25.04.2020>

Dear reader,

Hi! If you are interested in Forex please read carefully the below article that shows how you can make use Fibonacci Numbers and Their Value as a Technical Tool.

 

What are moving averages?

Most commonly used technical indicators. A simple a way to smooth out price fluctuations to help you distinguish between typical market “noise” and actual trend reversals.

Like every indicator, a moving average indicator is used to help us forecast, or speculate, future prices.

 

Choosing the proper Length

The “length” or the number of reporting periods including the moving average calculation affects how the moving average is displayed on a price chart.

The longer its length, the more data points that are included in the moving average calculation, which means the less any single price can affect the overall average

In this section, we first need to explain to you the two major types of moving averages:

  • Simple
  • Exponential

Problem with the simple moving average: they are susceptible to spikes. On the other hand, the exponential moving average places more emphasis on what has been happening lately. When trading, it is far more important to see what traders are doing NOW rather what they were doing last week or last month.

 

How to Use Moving Averages to Find the Trend?

The simplest way is to just plot a single moving average on the chart. When price action tends to stay above the moving average, it signals that price is in a general UPTREND.

In an uptrend, the “faster” moving average should be above the “slower” moving average and for a downtrend, vice versa.

If the moving averages crosses over one another, it could signal that the trend is about to change soon, thereby giving you the chance to get a better entry.

Moving averages can also act as dynamic support and resistance levels.


 

“I hope I am clear on this one. If not, contact us on social media and we will do our best to help you.

Thank you for reading my articles and watching my videos.”

Marios Kyriakou

Disclaimer: This article is intended for educational purposes only and does not replace independent professional judgement. Its purpose is to act as a complementary educational service to society, promoting personal development and social, economic and cultural progress of citizens. While this content has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the creator to the accuracy or completeness of the information presented or any other written or oral information made available to any interested party and any such liability is expressly disclaimed.
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