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Crowd Money: A Practical Guide to Macro Behavioural Technical Analysis by Eoin Treacy

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Chapter 11: Moving Averages

What we will cover in this chapter

  • Moving averages can be defined as “trend-smoothing devices that lag by definition”.
  • A 200-day moving average is best thought of as a trend mean.
  • The closest thing we have to a natural law of physics in the markets is that when prices diverge from the mean they will eventually revert back to it.
  • The moving average also offers a crude indication of trend direction.

DAVID FULLER HAS often described mean reversion as “the closest thing we get to a natural law of physics in the social science of investor sentiment”. As market sentiment ebbs and flows within a trend, we invariably see prices become divorced from a mean before eventually reverting back towards it. This often ...

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