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Moving Averages

A simple way to smooth price and see direction.

Moving Averages illustration

A moving average (MA) is the average close over a period. It smooths out noise so you can see the underlying direction.

Simple (SMA) and exponential (EMA) are the two common types. The EMA reacts faster to recent price.

Price above a rising MA is a bullish signal; below a falling MA is bearish. Crossovers of a faster and slower MA are lagging signals, so use them with structure.

Moving averages do not predict the future; they describe the past. Use them as a filter, not a reason to trade.

Takeaways

  • A moving average smooths price to reveal direction.
  • EMA reacts faster than SMA; price above a rising MA is bullish.
  • MAs describe the past - use as a filter, not a trade trigger.

Self-check

Is a moving average predictive?

No - it lags and describes past price; use it with structure.

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