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Using Moving Averages: A Summary

Moving averages of many types and they are widely used in the trading industry for their vast
number of uses. The most often used types of moving averages are exponential and straightforward.
They are easy to calculate and tend to predict the trends with more accuracy.
Simple moving averages are susceptible to spikes which can reduce the accuracy. Exponential
moving averages, similarly, are based on the latest market prices which make them prone to
disillusion by sentiment. The period of the moving average decides how smooth it is so simple
moving averages are smoother than exponential and even more so with more extended period
simple moving averages. The trends can be identified faster using an exponential moving average,
but they can be less accurate, on the other hand, you might realize a trend later in simple moving
averages, but they are safer. They are also used as dynamic resistance and support levels across the
market. One way to predict these are to plot multiple moving averages on the same graph. The zone
between the two moving averages is where you can make most of your money even during choppier
times. It is hard to determine which moving average to use and there is no right answer because the
answer depends on your trading style. If your risk tolerance is higher, exponential moving average is
the way to go. But if you don’t mind missing out on early trends and prefer to stay safe, simple
moving average is the best for you.

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