Moving averages:
Moving averages are an effective tool and have many different uses and applications. They can be used to determine trends, both long and short term depending on the time frame. They can be used as floating support and resistance levels, determining a bullish or bearish bias, or providing entries and exits of trades.
Moving averages smooth the price data to form a trend following indicator. They do not predict price direction, but rather define the current direction with a lag. Moving averages lag because they are based on past prices. Despite this lag, moving averages help smooth price action and filter out the noise. They also form the building blocks for many other technical indicators and overlays, such as Bollinger Bands, MACD and the McClellan Oscillator. The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).
