9. Moving Averages—Finding Statistical Correlation
A moving average (MA) is a set of tracking lines that represent the average of past prices, normally based on the closing price of each session. These lagging indicators provide value in some configurations, specifically at crossover points. When the averages cross each other or evolve above or below the current price, you can use an MA as a confirming signal.
You need two MA lines to gain value from crossover; the most popular among the combined two-MA systems are 50-session and 200-session MAs. These MA(50) and MA(200) lines interact not only with price, but also with each other. An MA may also track support or resistance as a secondary means for identifying trading range and the level of strength ...
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