📈 Moving Average (MA) – Trend Indicator
The moving average is widely used to identify trend direction and strength by smoothing price variations.
🎯 Purpose
- Visualise the prevailing trend.
- Assess trend strength.
- Identify reversal or continuation points.
🔍 Types
| Type | Description |
|---|---|
| SMA | Arithmetic mean of closing prices |
| EMA | More weight to recent prices, faster reaction |
| SMMA | Reduces volatility, slower response |
⚙️ How to Use
- Slope indicates trend direction.
- Shorter periods give more signals but more false positives.
- Longer periods are more reliable but lag.
🔄 Buy/Sell Signals
- Strong buy: price crosses above a rising MA.
- Strong sell: price crosses below a falling MA.
📐 Formulas
SMA = Sum(Close, N) / N
EMA(t) = EMA(t-1) + K × (Close(t) – EMA(t-1)), K = 2/(N+1)
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