Chapter 5: Moving averages
Moving averages are the most widely used indicators in technical analysis and are available on most websites with a charting facility. In this chapter I’ll discuss the various types of moving average, how they’re calculated and their advantages and limitations. I’ll also suggest some suitable trading strategies you can use with moving averages.
The purpose of moving averages
A moving average helps you to distinguish an underlying trend within the fluctuations that occur as a result of day-to-day trading variations. Moving averages eliminate the subjectivity that’s inevitable when you use the visual or ‘eye’ method to identify trends. The moving average trendline is calculated and shown on a chart according to the ...