Confirming The Trend With The Simple Moving Average Indicators

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Confirming The Trend With The Simple Moving Average Indicators
Moving averages are the most common indicator in technical analysis. If you want to learn more, get free system plus much more,visit:

The moving average itself may also be the most important indicator, as it serves as the foundation of countless others, such as the Moving Average Convergence Divergence (MACD).

A moving average works by working to smooth out price by averaging price fluctuations into a single line that ebbs and flow with them. It is based on past prices and is therefore a “lagging” indicator. It is often used as part of trend following systems and occasionally as a support/resistance line in itself. Simple Moving Average
The simple moving average (SMA) and the exponential moving average (EMA) are the two most common types of the indicator.

The SMA is a basic average of price over the specified timeframe. For example, if one plots a 20-period SMA onto a chart, it will add up the previous 20 closing prices and divide by the number of periods (20) in order to determine what the current value of the SMA should be. The series of various points are joined together to form a line. Exponential Moving Average
The exponential moving average (EMA) is preferred among some traders. Unlike the SMA, it possesses multiplying factors that give more weight to more recent data points than prior data points. As a result, the EMA will react more quickly to price action. This can give a trader an earlier signal relative to an SMA.

Similar to SMAs, periods of 50, 100, and 200 on EMAs are also commonly plotted by traders who track price action back months or years. Uses of Moving Averages
Since moving averages are lagging indicators, they shouldn’t be misinterpreted as tools that can predict future price movements with any degree of resolution.

For example, by the time a moving average goes from being sloped in one direction or another to flattening, the price action has usually already changed due to the moving average’s lagging nature.

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