Moving Averages provide hidden way of understanding price patterns

Summary

Moving averages offer a quick yet deep way of analyzing price charts. By understanding how a) price moves in relationship to MAs, b) how MAs move in relationship to other MAs, and c) the angle of the MAs, traders can capitalize on the wave patterns and wave movements without knowing or identifying the waves. This means analyzing MAs is a short-cut for understanding the market structure, wave patterns and chart patterns.

Basically, price is always in a constant flux of moving away and back to the MA’s (similar to the tide of the sea), which is valid for all financial markets and time frames. The position of price and the MA’s is the key. By analyzing price and the MAs, traders can understand the chart dynamics in various ways and help determine:

 

  1. Whether the market is trending or ranging

  2. The direction of the trend

  3. When price is moving impulsively

  4. When price is moving correctively

  5. When the MAs are expected to act as a support or resistance

  6. When price is likely to continue with the trend

  7. When price could make a reversal



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