Identify trends with moving averages
A moving average represents the average of the prices (usually close) in the last n periods. For example, the 50 days moving average shows the average of closing prices of the last 50 days. It can be used for many purposes, one of them is to identify trends. Why is it important?
Have you ever heard this: “the trend is your friend, until the end when it bends”? It sounds easy, doesn’t it? Just follow the trend and exit when the trend changes. The question is, how do you know when the trend changes? There are many ways to do it using moving averages. You can compare two or more of them or the price versus a moving average. The slope can be considered as well.
This video will provide you more details on how to use the moving average for trend identification.
If something is not clear, feel free to comment and I will reply as soon as possible.
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