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 Bands┬«.
  • 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. IRR Rule

    A measure for evaluating whether to proceed with a project or ...
  2. Golden Cross

    A crossover involving a security's short-term moving average ...
  3. Rule Of 72

    A shortcut to estimate the number of years required to double ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally ...
  5. Cup and Handle

    A pattern on bar charts resembling a cup with a handle. The cup ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, ...
RELATED FAQS
  1. What is a common strategy traders implement when using Moving Average Envelopes?

    Apply a moving average envelope to a price chart by adding upper and lower moving bands a percentage above and below a standard ... Read Full Answer >>
  2. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  3. Do plane tickets get cheaper closer to the date of departure?

    The price of flights usually increases one month prior to the date of departure. Flights are usually cheapest between three ... Read Full Answer >>
  4. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  5. Is Colombia an emerging market economy?

    Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >>
  6. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
Hot Definitions
  1. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  2. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  4. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
  5. Godfather Offer

    An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium ...
Trading Center