A moving average is a simple measure of the mean of a continuous series. It is extensively used in finance to plot price data, with different time periods. For example, the 15-day moving average and 30-day moving average can be used to plot longer and shorter-term trends in an asset’s price. Longer periods will only show more significant, long-lasting trends whereas shorter periods will show recent fluctuations. Moving averages are popular in equities trading.
Many technical traders use charts with multiple moving averages to predict price moves. One simple but popular strategy is to use two averages, one short and one long, and trade it in the following way:
· When the short-term average drops below the long-term, it is a sell signal.
· When it rises above the long-term average, buy.
This is a simplified version of the sort of strategy traders can use with moving averages. Often the direction of the moving average is more important than its absolute level.
ADSS offers a range of global markets for traders, with CFD opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.