Normally, optimal lengths vary with time, market, and strategy. As always, there isn’t any definite answer as to what works best. Since moving averages can have different lookback lengths, you’re left with many choices as to what settings will work the best in your market and with your strategy. (This will be covered more in-depth later in the article!) Which Is The Best Period Length? Investors and traders often use it to gauge whether the market is bearish or bullish and to time the longer swings of the equity markets. Of these, the 200-day moving average is the most widely used indicator. The most common and widely used setting for a moving average, are the 5, 10, 20, 50, 100, and 200 bar moving averages. A longer lookback serves well to measure long-term trends, while shorter lengths are better at discovering momentum and the short-term direction of the market. The length of the moving average depends on what it’s used for. The average is then plotted on the chart, giving traders and investors the ability to visually determine the direction and strength of the trend. This is done by calculating an average of the price, typically the close price, with the length of the lookback period. Note that moving averages sometimes will be referred to as “MA” What Is A Moving Average?Ī moving average is a technical indicator that is used to smoothen price action. We will also have a look at different common concepts that include moving averages, such as golden and death crosses. In this article, we will learn what moving averages are, and how they can be used in trading and investing.
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