These 3 charts help you understand how moving averages work
By Elliott Wave International
Moving averages are a popular tool for technical traders because they can "smooth" price fluctuations in any chart. EWI Senior Analyst Jeffrey Kennedy gives a clear definition:
"A moving average is simply the average value of data over a specified time period, and it is used to figure out whether the price of a stock or commodity is trending up or down... one way to think of a moving average is that it's an automated trend line."
Moving averages are both easy to create and extraordinarily dynamic. You can choose which time frame to study as well as which data points to use (open, high, low, close or midpoint of a trading range).
Jeffrey Kennedy shares 3 of the most popular moving averages in this excerpt is from his 10-page eBook: How to Trade the Highest Probability Opportunities: Moving Averages. Continue reading "Moving Averages Can Identify a Trade"