Moving Averages: Conclusion
  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

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.

  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
RELATED TERMS
  1. Simple Moving Average - SMA

    A simple, or arithmetic, moving average that is calculated by ...
  2. Exponential Moving Average - EMA

    A type of moving average that is similar to a simple moving average, ...
  3. Moving Average Ribbon

    A technique used in technical analysis to identify changing trends. ...
  4. Death Cross

    A crossover resulting from a security's long-term moving average ...
  5. Golden Cross

    A crossover involving a security's short-term moving average ...
  6. Linearly Weighted Moving Average

    A type of moving average that assigns a higher weighting to recent ...
RELATED FAQS
  1. What are the most common periods used in creating Moving Average (MA) lines?

    Learn the most commonly selected periods used by traders and market analysts in creating moving averages to overlay as technical ... Read Answer >>
  2. How are moving averages used in trading?

    Moving averages are very popular tools used by technical traders to measure momentum. The main purpose of these averages ... Read Answer >>
  3. What is the difference between a simple moving average and an exponential moving ...

    The only difference between these two types of moving average is the sensitivity each one shows to changes in the data used ... Read Answer >>
  4. What are the main advantages of using Moving Averages (MA)?

    See why moving averages have proven to be advantageous for traders and analysts and useful when applied to price charts and ... Read Answer >>
  5. Are exponential moving averages more effective than simple or weighted moving averages?

    Learn about different types of moving averages, as well as moving average crossovers, and understand how they are used in ... Read Answer >>
  6. Why is the Moving Average (MA) important for traders and analysts?

    See why the statistical concept of moving averages plays a central role for traders and chartists who rely on technical analysis ... Read Answer >>

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