A moving average indicator is a key indicator that illustrates the direction of price movement. The mathematical price average of a certain time as indicated by candlestick quantity is used while processing moving averages. To determine the value of a five-candlestick period, for example, the indicator divides the sum of their closing values by five. The indicator then advances one candlestick forward and performs the same calculations.
A trader can create a smoother chart direction by building up a line of result values. By indicating the present trend, it smooths out price spikes.
The price sensitivity decreases as the period lengthens. However, the price chart’s lag grows. You can choose the period of the candlesticks and the calculation technique in the indicator settings.
Types of moving averages
Simple moving average
The simple moving average or SMA is an average arithmetical value for a given period.
Exponential moving average
Exponential moving average EMA smoothing works by taking into account the current average value on a previous period with smoothing. The priority decreases exponentially and never equals zero.
Weighted moving average
The weighted moving average WMA assigns top priority to the current price hence the WMA chart does not depend heavily on dated prices. The priority of importance increases linearly.
Smooth simple moving average
The smooth simple moving average SSMA takes into account a large amount of candlesticks throughout historical quotes and is much more smooth.
How to use moving average indicator
Moving Average is a great instrument of detection for a lateral trend wherein rules of trading that differ from rules of trend trading take precedence. Moreover when two indicators with different time intervals intersect it helps determine trend reversals.
