Moving averages are a simple way to smooth price fluctuations over time. The average price of the closing price of a certain period of time in the past is the moving average. Connect these moving averages and display them in the chart, which is the moving average we see. As shown below:
Like every indicator, the moving average indicator can be used to help us predict future price movements. By judging the slope of the moving average, we can better judge the potential direction of the market price.
As we said, moving averages can smooth price movements.
There are different types of moving averages, and each moving average has a different degree of “smoothing” to the price.
In general, the smoother the moving average, the slower its response to price movements.
The more ups and downs in the moving average, the faster its response to price movements. In order to get a smoother moving average, you need to obtain average data on closing prices over a longer period of time.
Now, you are probably thinking, “How do I use the moving average to trade?”