Moving Average


Moving Averages show the average price within a defined time period by considering the most recent closing prices over the given time period and the result is then divided by the number of prices used in the calculation:

For example: In a 10-day moving average, the last 10 closing prices are added together and then divided by 10

There are four types of Moving Averages: Simple MA, Exponential MA, Smoothed MA, and Weighted MA. They differ from each other only in terms of the weight coefficients that are assigned to the latest data

Moving averages are used to define areas of support and resistance, entry points into the market, to emphasize the direction of a trend, and to smooth out price and volume fluctuations

The direction of the indicator shows whether a bullish or bearish trend is present in the market at the moment

With two or more moving averages applied to one chart, the further apart they are from one another the stronger the indication of the current trend

When the moving averages intersect, this confirms the change in a trend. It is only a confirmation because the change of this indicator is late in comparison with a price change