The Moving Average (MA) is a technical indicator to identify trend directions and determine resistance and support levels. Besides that, MA can also help traders analyze the average price movement within a specific time frame and determine the next potential market move.
The choice of timeframe is flexible according to the needs of traders. For short-term trading, traders can use short MAs. As for long-term trading, traders can use long MA. The most frequently used timeframes are 15, 20, 30, 50, 100, and 200 days.
Simple Moving Average (SMA) and Exponential Moving Average (EMA) are the two most popular types of MA. For SMA, the calculation takes a sum of all the data points in a given time period and then divides it by the total number of time periods. Meanwhile, the EMA calculation focuses on the recent asset price data and keeps the older price observation in place.
In conducting technical analysis, traders shouldn’t rely on only one indicator. Trader also has to use other technical indicators to make the results more accurate.