By the end of this chapter, you should
Be aware of how moving averages are used to identify trends
Be able to calculate a simple moving average
Be able to calculate an exponential moving average
Be familiar with the concept of directional movement
Be familiar with the construction of envelopes, bands, and price channels
One of the most successful methods of identifying and profiting from trends is the use of moving averages. A moving average is a constant period average, usually of prices, that is calculated for each successive chart period interval. The result, when plotted on a price chart, shows a smooth line representing the successive, average prices. Moving averages dampen the effects of short-term ...