hollaa!! merry Christmas to everybody! njoy your holiday? hope so. i know i did!
emm today i’m going to share a little bit about moving average. lets start, shall we?
A moving average is simply a way to smooth out price action over time. By “moving average”, we mean that you are taking the average closing price of a currency for the last ‘X’ number of periods.
Like every indicator, a moving average indicator is used to help us forecast future prices. By looking at the slope of the moving average, you can make general predictions as to where the price will go.
As we said, moving averages smooth out price action. There are different types of moving averages, and each of them has their own level of “smoothness”. Generally, the smoother the moving average, the slower it is to react to the price movement. The choppier the moving average, the quicker it is to react to the price movement.
Types of MA
1. Simple MA
Basically, a simple moving average is calculated by adding up the last “X” period’s closing prices and then dividing that number by X. If you plotted a 5 period simple moving average on a 1 hour chart, you would add up the closing prices for the last 5 hours, and then divide that number by 5. Voila! You have your simple moving average.
2. Exponential MA
Exponential moving averages (EMA) give more weight to the most recent periods. What this does is it puts more emphasis on what traders are doing NOW. When trading, it is far more important to see what traders are doing now rather than what they did last week or last month.
these two MA are the popular ones. there are other MA’s but i prefer to discuss only these two. ok.
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