Moving Averages

Smoothing the noise to see the drift.

Price is jagged. The average underneath it is not. Every period weighted equally. Smoother, slower to react. EMA (exponential) Recent periods weighted more heavily. Faster, but whipsaws more. Price above the average The recent drift is upward. The average sloping up The drift is not just up, it is strengthening. Common lengths 20 for the short term, 50 for the medium, 200 for the long. Nothing sacred about them beyond the fact that everyone watches them. A moving average is always late. It is an average of the past, so by construction it turns after price does. Its value is in seeing the direction clearly, never in catching the turn. Cuts noise Gives a clear, objective trend read Doubles as a dynamic support and resistance level Lags by design Useless in a range, where it is chopped to pieces Every length gives a different answer

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: Charts.