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Moving Averages
The moving average is an indicator that is frequently used in technical analysis to show the average value of a security's price over a period. Moving averages are generally used to measure momentum, to show the direction of a trend, to define areas of possible support and resistance, and to smooth out the noise that is caused by volume fluctuations.
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The moving average is one of the simplest indicators a trader can use. It can, for example, be the 9 and 20 day moving averages (MA). Traders study their cross-overs and the relative position of the price with respect to the moving averages. Price movements on a chart can be shown in different formats such as bars, candles or lines.
The cross-over between two moving averages may signal a change in trend. When the fast MA (9 day) crosses the slow MA (20 day) from below to above, it signifies a bullish trend. If it crosses from above to below, it signifies a bearish trend. Moving averages may in some situations be used as support or resistance levels for a given trade.
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