There are several types of moving averages.
Simple moving average and exponential moving average are the most common types of moving average.
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Simple moving averages are the simplest form of moving averages, but are vulnerable to spikes (severe instantaneous change).
Moving averages give more weight to the recent price, meaning they place more emphasis on what traders are doing now.
It is much more important to know what traders are doing now. It is less important to know what they did last week or last month.
Simple moving averages are smoother than exponential moving averages.
Moving averages with a longer period are smoother than moving averages with a shorter period.
You can identify a trend faster by using the moving average , but you also run the risk of dealing with many mistakes.
Simple moving averages are slower to respond to price action, but save you from spikes and erroneous signals .
However, due to their slow reaction, they can delay you from making a deal and cause you to miss out on good opportunities.
You can use moving averages to determine the trend, the time of entering the trade and the time of death of the trend.
The moving average can be used as dynamic support and resistance levels .
One of the best ways to use moving averages is to draw different types so that you can see both long-term and short-term movement.
Did you understand all the concepts? How to open your technical software and try to put some moving averages on the chart?
Remember, moving averages are convenient. The hard part is figuring out which one to use!
That’s why you need to test them and find out which one fits your trading style. You may prefer a sequence system. Or maybe you want to use them as dynamic support and resistance.
Whichever one you choose, be sure to take action with complete information and test each one to see how each one fits into your overall trading plan.
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