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Technical Analysis Explained, Fifth Edition: The Successful Investor's Guide to Spotting Investment Trends and Turning Points, 5th Edition by Martin J. Pring

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11 MOVING AVERAGES

It is evident that trends in prices for any freely traded entity can be very volatile, almost haphazard at times. One technique for dealing with this phenomenon is the moving average (MA). An MA attempts to tone down the fluctuations of stock prices into a smoothed trend so that distortions are reduced to a minimum. The three principal types of MAs used in technical analysis are simple, weighted, and exponential. When the terms “moving average or MAs” are used in this book, we are referring to the simple type. Exponential MAs (EMAs) and weighted MAs (WMAs) will always be specifically referenced. The construction and use of these averages are different; therefore, each type will be dealt with in turn. In the meantime, it’s important ...

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