1. Moving Averages: Introduction
  2. Moving Averages: What Are They?
  3. Moving Averages: How To Use Them
  4. Moving Averages: Factors To Consider
  5. Moving Averages: Strategies
  6. Moving Averages: Different Flavors
  7. Moving Averages: Conclusion


By Casey Murphy, Senior Analyst ChartAdvisor.com

In this tutorial, we've covered the basics of moving averages. Here's a brief recap:

  • Few technical indicators are as popular and widely followed as the moving average.
  • Moving averages come in various forms, but their underlying purpose remains the same: to help technical traders track the trend of financial assets by smoothing out the day-to-day price fluctuations, or noise.
  • The simplest form of a moving average is appropriately known as a simple moving average (SMA). It is calculated by taking the arithmetic mean of a given set of values.
  • The exponential moving average (EMA) assigns a weighting to recent data because many traders regard this as the major downfall of the SMA.
  • Some of the primary roles of a moving average include identifying trends and reversals, measuring the strength of an asset's momentum and determining potential areas where an asset will find support or resistance.
  • A moving average can be a great risk management tool because of its ability to identify strategic areas to stop losses.
  • Using moving averages can be very ineffective during periods where the asset is trending sideways.
  • There are many different strategies involving moving averages. The most popular is the moving average crossover.
  • Moving averages are used in the creation of a number of other very popular technical indicators such as the moving average convergence divergence (MACD) or Bollinger BandsĀ®.
  • Moving averages won't solve all your investing problems. However, when used judiciously, they can be valuable tools in planning your trading strategy.

Related Articles
  1. Trading

    How To Use A Moving Average To Buy Stocks

    The Moving Average indicator is one of the most useful tools for trading and analyzing financial markets.
  2. Trading

    The 7 Pitfalls Of Moving Averages

    While moving averages can be a valuable tool, they are not without risk. Discover the pitalls and how to avoid them.
  3. Trading

    Use Moving Averages to Buy Stocks

    A moving average constantly updates a stock's average price, but it cannot predict a stock's performance.
  4. Trading

    Simple Vs. Exponential Moving Averages

    These technical indicators help investors to visualize trends by smoothing out price movements.
  5. Trading

    Weighted Moving Averages: The Basics

    We take a closer look at the linearly weighted moving average and the exponentially smoothed moving average.
  6. Trading

    Using Technical Indicators To Develop Trading Strategies

    Unfortunately, there is no perfect investment strategy that will guarantee success, but you can find the indicators and strategies that will work best for your position.
  7. Financial Advisor

    Moving Average Convergence Divergence - MACD

    Learn about this momentum indicator that shows the relationship between two moving averages.
  8. Investing

    Moving Average Bounce

    Find out how this simple trading strategy can be added into your trading arsenal.
  9. Trading

    A Primer On The MACD

    Learn to trade in the direction of short-term momentum.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center