What is the Moving Average?

As a technical research tool, the moving average (or MA) is able to produce an up-to-date and smoother average price. The trader will pick the amount of time for the average. It can be anywhere from a few minutes to a couple of weeks. Using the moving average to purchase shares is a very common trading technique because it is easily suited to any time period.

It also provides a few benefits as well as many choices, as there are more forms of moving averages to pick from. A MA also allows traders to visualize trends even better since it eliminates any noise that might make price charts impossible to interpret.

About the moving average

By using the MA, traders help decrease the irregularities that occur on a particular price chart. To see where the market is headed, take a glance at the moving average. When it goes up, the price is going up too. If it goes down, the price is going to decline. If it’s going vertically, the price is probably within a range.

If the price is over the MA, it indicates that the trend is certainly up. If it’s below it, there’s definitely a downward trend.

There are several ways that a trader can measure the MA. They can use the simple moving average (SMA) that collects a list of relevant daily closing prices and splits them into new averages. Then there is the exponential moving average (EMA) that responds more rapidly to price fluctuations than the SMA. Neither of these averages is superior to the other and anyone can use them for various reasons.

Crossovers are a form of MA as well. There is the price crossover that is relevant if the price is above or below the MA. Traders are also free to add two moving averages to only one chart.

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