Moving averages a🐟re one of the most commonly used technical indicators in stock, futures, and forex trading. Market analysts and traders use moving averages to identify significant ꦇtrends, smoothing out the noise and short-lived spikes in the prices of individual stocks or indexes.

There are different types of 澳洲幸运5开奖号码历史查询:moving averages, cܫalculated in different ways and over dif🍎ferent time periods. The type of moving average and measurement period match the strategies a trader seeks to implement.

Common Moving Average Periods

Traders and market analysts commonly use several periods in c🐓reatinꦉg moving averages to plot their charts.

For identifying significant, long-term support and resistance levels and overall price trends, the 50-day, 100-day, and 200-day moving averages are the most common. Based on historical statistics, these longer-term moving averages are considered 澳洲幸运5开奖号码历史查询:more reliable trend indicators and less ꦡsusceptible to temporary fluctuatio🍃ns in price.

The 200-day moving average is considered especially significant in stock trading. When the 50-day moving average of a stock price remains above the 200-day moving average, the stock is generally thought to be in a bullish trend. A 澳洲幸运5开奖号码历史查询:crossover to the downside of the 200-day moving average is int🍸🌜erpreted as bearish.

The 5-, 10-, 20-, and 50-day moving average𒆙s are often used to spot near-term trend changes. Changes in direction by these shorter-term moving averages🥀 are watched as possible early clues to longer-term trend changes. Crossovers of the 50-day moving average with either the 10-day or 20-day moving average are regarded as significant.

The 10-day moving average plotted on an hourly chart is frequent﷽ly used to guide traders in intraday trading.

Some traders use 澳洲幸运5开奖号码历史查询:Fibonacci numbers (5, 8⭕, 13, 21 ...) 𒐪to select moving averages.

Types of Moving Averages

Moving averages are used to identify significant support and resistance levels. Traders and market analysts watch for crossovers of longer-term moving averages by shorter-term moving averages as possible indicators of trend changes in intraday trading and in regard to long-term trends.

Most moving averages act as both trendline indicators and the building blocks of more ambitious technicalღ tools.

There are numerous variations of moving averages. They can be calculated based on closing price, opening price, high price, low price, or a calculation combining these varioඣus price levels.

Most moving averages are some form of the 澳洲幸运5开奖号码历史查询:simple moving average (SMA), which is the average price over a given period, or the 澳洲幸运5开奖号码历史查询:exponential moving average (E𓃲MA), which is weighted to favor more recent ꦕprice action.

Simple movingꦅ averages can be slow to catch up if large price swings occur. Traders often look at exponential mov⛄ing averages instead, as they react quicker to price changes, providing a more accurate reading.

Time is of the essence when trading. An EMA and a 澳洲幸运5开奖号码历史查询:double exponential moving average (DEMA) bot🐬h reflect the current price trend for given securities in a more up-to-date reading.

Moving averages are laggဣing indicators by definition, so getting the readings up to speed is important. The EMA gives more weight to the most recent prices, alℱigning the average closer to current prices.

Short-term traders typically rely on the 12- or 26-day EMA, while the𝓀 ever-popular 50-day and 200-day EMA is used by long-term investors. While the EMA line reacts more quickly to price swings than the SMA, it can still lag quite a bit over longer periods.

DEMA helps to solve the lagging issue, bringing a moving average line closer to the current fluctuations in price. This metric is calculated not just by doubling the EMA but by using the following complex formula: DEMA = 2*EMA - EMA(EMA), where the current EMA is a function of the EMA fac🎶tor.

Essentially, this means even more weight is applied to the recent data, bringing the DEMA line into closer correlation with the current price. Traders see DEMA crossovers before EMA and SMA cross🔯overs, allowing for quicker reaction times with trades.

One of the m♚ost common trading strategies traders use with the DEMA tool is id🥀entifying price movements when long-term and short-term DEMA lines cross.

For example, if a trader sees a 20-day DEMA come down and cross the 50-day DꦓEMA (a bearish signal), they may sell long positions or place new short positions. Conversely, the trader enters long positions and exits s💞hort positions when the 20-day DEMA crosses back up and over the 50-day.

Drawbacks of Moving Averages

Moving averages are backward-looking by nature. While EMAs can reduce the lag effect on developing trends, they 澳洲幸运5开奖号码历史查询:still rely on past data that can never b𓂃e applied to the future with comple💃te confidence.

Securities sometimes move in澳洲幸运5开奖号码历史查询: price cycles and rep🐭eat past behavior, but trends that are plotted with a moving average may have no relationship to future movements.

Additionally, the increased reliance on recent price movements with an EMA tends to make it more sensitive to false trading signals, or whipsaws, than an SMA. For this reason,♊ an EMA may require further confirmation befor𒀰e a trade can be identified.

There is also room for user error with any EMA. Traders must decide what 澳洲幸运5开奖号码历史查询:time interval to apply t🐼o their formula, and they must also decide how heavily to weigh their analysis toward recent prices (and which prices are considered to be recent).

False s꧑ignals can be generated through inappropriate parameters.

Explain Like I'm Five

A moving average is a chart that shows the average 🐠price of an asset over a recent period of time, rather than the current price. They allow traders to look at longer-term 🥂price trends and ignore daily fluctuations. An exponential moving average places greater weight on more recent prices.

Traders typically compare two moving averages to see how the market for an asset is changing. While there's no "correct" moving average, many long-term traders use the 200-day and 50-day moving averages. For short-term traders, the 26-day and 12-day moving averages are common.

The Bottom Line

M♊oving averages help traders identify trends in stock prices by eliminating external noise. There are a variety of ways ▨to calculate moving averages, each depending on the goal of the trader and what they are ultimately trying to achieve.

Choosing the period of the moving average is a key comp꧋onent༒ in the results a trader will receive. That said, the 200-day moving average is seen as one of the most useful periods to study, particularly when overlaid with the 50-day moving average.