The Moving Average is one of the most widely used technical indicators because it is versatile and it is simple to set up and use. Basically, it is a device used to follow and detect trends in the movement of a financial product. The technical analyst will use it to identify the formation of a new trend or to signal when an old trend has ended or has reversed.
Moving Average Based Indicators
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Moving Averages Based Indicators - Trend
The moving average is one of the most widely used technical indicators because it is versatile and easily constructed. It serves as a device to follow trends in the movement of a currency (or stock). Its purpose is to identify and signal to a technical trader that a new trend, a sustained movement either up or down in the currency, has begun or that an old trend has ended or reversed. The reason trends are easier to see using a moving average is that it acts to smooth the volatility inherent in looking at the price action alone to recognize trends. Overlapped with the price action the moving average produces buy and sell signals to the analyst or trader. The signals have a lag to market conditions, therefore a moving average is a trend following indicator.
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Moving Average
The Moving Average is the most basic technical indicator when it comes to technical analysis. It is used to identify trends, as it smoothes price action into a signle line. The Moving Average gives basic trading signals when price crosses it.
Moving Average Envelope
The Moving Average Envelope indicator creates parallel lines to a moving average at certain percentages. The lines create a band that can help measure price volatility and extremes.
MACD (Moving Average Convergence Divergence)
The MACD indicator charts the convergence and divergence of short term and long term moving averages. MACD shows graphically when the short term movements of price rise or fall faster than the longer moving average would suggest. This indicates the recent trend.
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