Moving Averages

Moving Averages (MA) is a price based indicator in technical analysis. There are two types of moving averages, simple moving average and the exponential moving average.

The simple moving average (SMA) measures the average prices of a given asset in a period of time.

Compared with the SMA, the exponentially weighted moving average responds much more to recent price changes. It is calculated by taking the difference between the current price and the previous EMA, multiplying this value by the set percentage (usually depends on the number of periods considered), then adding the resulting number to the previous EMA value.

Moving averages is a lagging indicator to see the overall price behavior of assets based on historical prices. However, it is a useful tool for traders to identify the trend direction and determine support and resistance levels.