Moving averages, do you know them? In this article, we will give you all the information you need about them. A moving average is a technical indicator that follows a trend. A trend based on market data to offer an average value.
The moving average is applied to the price, which is drawn as a line that goes up and down. This, following its movement. Like any other indicator, you must understand it and learn how to use it.
What is a moving average for?
The moving average can present us with a summary of the trend at a glance. A moving average will not be able to show the consensus of the traders on asset values. This means that it can tell us approximately what the fair price of an asset is at any given time.
It is worth approximately what the asset is worth at any time. The price is usually a little too high or a little too low.
To know how to configure an indicator, you must first be clear about what you want the indicator to show you.
How to adjust them?
There is only one parameter that you have to move, this is the number of calculation periods. The higher this number, the slower it will be. But also the more stable and unflappable.
In short, you can play with the number of periods until the average fits as you wish. You will have to practice and each time you will know better how a moving average is calibrated on the chart. As simple as that!
What type of moving average to choose?
Perhaps what we are going to tell you may surprise you, but it really does not matter which one you choose. Choose the one that best suits the graph. The one that shows you well what you want to see.
It is worth commenting and that you know that a simple average is slower than an exponential average. Or that a balanced moving average may have a better ability to stick to the price in conflictive areas than other types of average.
The only thing that matters in fitting a moving average is that you like how your chart looks.
What is the best simple moving average trading strategy?
The most suitable moving average method will depend on the preferences of each user. So, choose the one that works best for you and start trading!
Conclusion
The moving averages will help you a lot when trading. These are usually simple or complicated depending on how you need it. At simpler extremes, the indicator can help you smooth out fluctuations within a choppy market. This, making it easier to see what’s going on, without volatility noise.
Remember that with moving averages you can also do intraday trading, swing trading or long-term investing. We hope that the information in this article can be helpful for your training as a professional trader.