A1 Trading Company

Technical analysis guide

Moving Averages

Big Idea: Moving averages are basically a collection of data points where price has been before and the average of those data points. This helps suggest the general trend of price action, and it can also be used as support or resistance. Any break in either direction could signal continued selling or buying. The different kinds of moving averages are called simple, cumulative and weighted. Traders use these various moving averages according to the type of data they would like to look at. Two main strategies traders use with moving averages is trend following and mean reversion.

Understanding Price Action

Think of price action like a rubber band and the moving average is the center. If price stretches too far in either direction, the stronger the pull, and eventually, price will return to “normal” levels. Although not always 100% accurate, moving averages help the trader see what’s going on with price action and whether or not to be bullish or bearish in the short/long term.

Key Takeaways

A moving average is a collection of data points that take the average of where price has been before
Traders like to use moving averages for mean reversion and trend following
Price can act like a rubber band around moving averages
They can be used to gauge the short or long term trends of any kind of market

Free Telegram

Join free telegram for analysis, trade ideas, & trading resources!

Join telegram

Related Videos

How to trade moving averages

Keep Learning Technical Analysis!

Up Next...
  • Technical Analysis
    Support & Resistance
    Learn how to use the number 1 most commonly used price action tool!

    go to course

    Technical Analysis
    Trendlines
    Learn how to draw and utilize trendlines in your technical analysis!

    go to course

    Technical Analysis
    Moving Averages
    Learn all about moving averages, and how to trade with them!

    go to course

  • Technical Analysis
    Candlestick Pattern
    Learn all about candlestick patterns, how to spot them, and how to trade them!

    go to course

    Technical Analysis
    Engulfing & Pinbar Candlesticks
    Learn all about engulfing & pinbar candlestick patterns, how to spot them, and how to trade them!

    go to course

    Technical Analysis
    Doji candlestick
    Learn all about doji candlestick patterns, how to spot them, and how to trade them!

    go to course

  • Technical Analysis
    building a technical bias
    How to use technicals to assist your trading entries

    go to course

    Technical Analysis
    breakout trading
    Learn how to capture momentum in the markets with this simple breakdown

    go to course

    Technical Analysis
    Reversal Trading
    Learn how to spot markets reversing early, and get involved!

    go to course

Home
Edgefinder
Signals
There is a significant degree of risk involved in trading securities. With respect to foreign exchange trading, there is considerable risk exposure, including but not limited to, leverage, creditworthiness, limited regulatory protection and market volatility that may substantially affect the price, or liquidity of a currency or currency pair. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.
homesmartphonelaptop-phonemenumenu-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram