Simple Moving Average

A simple moving average is a simple and popular technical analysis indicator. It is one of the indicators that follows trend movements, helping to identify the beginning of a new direction and signaling its completion. Its slope is used to calculate the strength of an existing trend.

This indicator is used as a basis in many technical indicators. A trend line constructed from its points is also called a simple moving average.

A simple moving average is a simple arithmetic average of the price value over a specified period.
It's calculated using the following formula: prices are summed across several time frames for the desired period, and the resulting sum is divided by the number of time frames.

the Moving Average indicator has long been used to add a moving average to a currency pair chart; it is found in almost every trader's terminal.

A moving average serves as an index of price balance over a specific period; the lower its value, the shorter the required equilibrium period. Standard price constantly follows the main market direction, filtering out minor fluctuations. The smaller the moving average value, the faster a new direction is determined. At the same time, it produces more false moves. Conversely, a higher value means a new direction is determined much more slowly and fewer false moves occur.

Simple moving averages are quite simple to use. They don't predict trend movements, but rather signal the emergence of an existing trend. Since moving averages follow the trend indicator, they are best used during a trend; during market breaks, this tool is ineffective, as it doesn't reflect current price changes.
Before using this indicator, it's necessary to conduct an appropriate analysis of the specific trend characteristics of a given price.

There are methods that help to use the simple moving average more effectively:

• Distance from the main significant levels.
• Reversal or signals for a supposed reversal of the existing trend received from other indicators.
• Support and resistance lines .
• Using several moving average options to identify signals for a change in trend.