Using moving averages to assess trend direction is the
oldest form of technical analysis and remains one of the most commonly
used indicators. The primary benefit provided by a moving average is to
reduce market "noise" (rate fluctuations) that make it difficult to
accurately interpret real-time exchange rate data. Moving averages
"smooth out" these fluctuations, making it easier for you to identify
and authenticate potential market rate trends from the normal
up-and-down rate fluctuations common to all currency pairs.
All traders seek to find a trend when studying pricing data. Traders also attempt to identify a rate trend reversal point in order to time market buys and sells at the most profitable level. Moving averages can help in both regards.
Moving averages are essential to other types of technical analysis as well - most notably Bollinger Bands and Stochastic Measurements. You'll learn about these indicators in later lessons.
All traders seek to find a trend when studying pricing data. Traders also attempt to identify a rate trend reversal point in order to time market buys and sells at the most profitable level. Moving averages can help in both regards.
Moving averages are essential to other types of technical analysis as well - most notably Bollinger Bands and Stochastic Measurements. You'll learn about these indicators in later lessons.
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