Friday, July 19, 2024

Moving Average (MA)

In this article, We learn about “Moving Average (MA) “.Let’s Go!

A The Moving Average (MA for short) is a technical indicator used to average the price of a currency pair over a period of time.

Moving averages are very popular among Forex traders mainly because of their simplicity.

In statistics, a moving average is simply the average of a specific set of data.

In the case of technical analysis, these data are in most cases expressed in terms of the closing price of the currency pair during a specific time period.

Calculating MA requires a certain amount of data, which can be large depending on the length of the moving average.

For example, a 5-day MA will require 5 days of data, while a 200-day MA will require 200 days of data.

This indicator is described as “moving” because the introduction of new data will replace old data points and “move” the lines on the chart.

The smoothing effect on the chart helps to indicate more clearly the direction in which the currency pair is moving: up, down or sideways.

SMA crossing over the price

Simple Moving Average, Exponential Moving Average, and Weighted Moving Average are by far the most popular.

A Simple Moving Average (SMA) is the most basic MA, it is just a straightforward calculation of the average price of a set of values ​​over a given time period.

If you were to calculate the SMA for a 20-day period, you would take the value of the past 20 days and divide the result by 20.

The

Exponential Moving Average (EMA), places more emphasis on recent prices, making the data more responsive than the SMA.

A Weighted Moving Average (WMA) puts more weight on recent data than the exponential moving average (EMA), by assigning linear weightings to ensure that the latest price pair averages higher than older prices.

You don’t actually need to know how to manually calculate each type of moving average as most trading platforms will do it for you automatically.

If you want to learn more foreign exchange trading knowledge, please click: Trading Education.

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