A moving average is a technical indicator that syndicates the price points of a tool over a quantified time frame and splits by the number of data points that give you a single trend line. It is widespread among traders because it can assist in controlling the current trend’s direction while decreasing the influence of random price points.
There are many moving average calculations, but most are used to plot a line in contrast to a price chart or an additional indicator. The course and slope of moving average lines update investors about the connection between traditional data values and current data values. The trading ideas of deviation, validation, overbought and oversold, provision and confrontation, and many more have origins in moving average analysis.
The use of moving averages for trend analysis is arguably the most common use of the indicator. There are many variations of moving averages that a trader may use to analyze a trend. Still, my favorite combination is the 10 EMA and 20 EMA.
These two moving averages can also be used as dynamic support and resistance. Several moving averages carry more weight than others in the market, and the 10 and 20-period moving averages are among them.
Last but not least is using moving averages to help determine if a market is overextended. One of the more common pitfalls among Forex traders is buying or selling too late. We want to avoid entering a market that has overextended itself. Moving averages can help us determine if this is the case.
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