Moving Averages
Moving averages are fundamental technical analysis tools that smooth price data by creating a constantly updated average price. They help identify trends, support and resistance levels, and generate trading signals when combined with other indicators.
Key Characteristics
- Trend Following: Smooth out price fluctuations to reveal underlying trends
- Lagging Indicator: React to price movements that have already occurred
- Multiple Types: Different calculation methods (SMA, EMA, WMA, etc.)
- Versatile: Used independently or as components of other indicators
Common Use Cases
- Trend Identification: Determine overall market direction
- Support/Resistance: Moving averages can act as dynamic support or resistance levels
- Crossover Signals: Generate buy/sell signals when prices or MAs cross
- Smoothing Data: Remove noise from price data for clearer analysis