Simple Moving Average

The simple moving average is a simple and popular technical analysis indicator. It is one of the indicators that repeats the movements of a trend, it helps in determining the beginning of a new direction and reports its completion, according to its inclined angle the strength of the existing trend is calculated.

This indicator is used as a basis in many technical indicators. Also called a simple moving average is a trend line constructed based on its points.

Simple Moving Average is a simple arithmetic average of the price value of a certain period.
It is calculated using the following formula: the prices for several time frames are summed up for the period of time you need and the resulting amount is divided by the number of time frames.

True, manual calculations have long since sunk into history, and to add a moving average to the chart of a currency pair, the Moving Average indicator ; it is found in almost every trader’s terminal.

The moving average acts as an index of price balance for a specific time; the lower its indicator, the shorter the equilibrium period is required. Standard value is in constant motion behind the main market direction, sorting out small swings. The smaller the moving average indicator, the faster the new direction is determined. At the same time, it makes more incorrect movements, or vice versa, if the indicator is higher, it means that the new direction is determined much more slowly and fewer incorrect movements appear.

Using simple moving averages is quite simple.
They do not predict the movement of a trend, but signal the emergence of an already established trend. Since moving averages follow the trend indicator, it is better to use them during a trend; during breaks in the market, this tool is not effective, since it does not reflect the current price change. Before using this indicator, it is necessary to conduct an appropriate analysis of the features of the trend of a certain price.

There are methods that help you use a 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 variants of the moving average to identify signals for a trend change.