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7 Simple Strategies of Highly Effective Traders by Alpesh B. Patel, Paresh H. Kiri

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Strategy 5. Moving Averages

Introduction

Moving averages come in various forms but their underlying purpose remains the same: they show the ebb and flow of the market as it evolves over time and help technical traders track the trends of financial assets by smoothing out the day-to-day price fluctuations, or noise. Moving averages are called lagging indicators as they are calculated from past prices. They are used as the basis for many other technical indicators, such as Bollinger Bands and MACD.

Moving averages do not predict the future price direction on their own; however, this strategy will help you to use them to predict a probable change in direction.

Strategy basics

Moving averages come in several guises but we will only consider ...

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