Should moving averages be given much importance?

I use moving average, boillinger bands and RSI indicators for technical analysis. Moving average is my top priority.

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I use moving averages because they accurately reflect the actual market movement. I primarily use the simple moving average (SMA) and the exponential moving average (EMA). SMAs are good for overall trend analysis, while EMAs react faster to recent price changes.

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i think that moving averages should be given some sort of importance bcs they can provide “some” objective view on the market plus they are useful in many trading system, so if a good part of traders gives it importance its shouldn’t be ignored

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There are many different opinions about moving averages.

At the very least, they’re important to keep an eye on because a lot of market participants watch the obvious ones (20, 50, 100, 200) so the price tends to react to them.

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funnily enough, that’s exactly the reason i do use them

i find they work to show me whether or not it is a trending market (there are, of course, other ways of knowing that, but MAs are a fast/easy/lazy one)

with ADX, i’m far more interested in whether it’s rising or falling than i am in its pure level

for example, i’d much rather put in a long entry if ADX is “above 18 and rising” than just if ADX is “above 25” (Linda Bradford Raschke has written a lot about this, if you want to check it out)

it depends what you mean by “work”

for me, they “work” exactly as they’re meant to, and i’m using SMA rather than EMA so they lag a little more

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hey thanks for your reply and especially for that name :smiley:

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no prob - thanks for not taking me the wrong way! sometimes i sound critical but don’t intend to be!

you and i were probably referring to different uses of MAs, i think … (a) using them to time entries (not my cup of tea) and (b) using them to show overall trend

I give moving average the highest level of priority because I use this indicator to know the support and resistance of the market and set targets.

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how do you do that, Ibrahim?! :laughing:

support and resistance are shown by swings high/low of prices, not by moving averages

you don’t need indicators to see support and resistance, just a price chart

“support” is another word for “swing-low”; “resistance” is another word for “swing-high” - it’s about price rejection

it’s much simpler than something that needs an indicator

the forum gradually fills with hugely mistaken statements like yours, above, because people just copy such misinformation from the posts of other members (or more likely bots!); they make no sense at all and help absolutely nobody :open_mouth:

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I have seen this description of MA’s being used as an S/R indicator more and more frequently recently. It is a misleading description.

MA’s do not, in a general sense, actually provide S/R levels at all. How can they? The current value of a particular MA depends entirely on where price has been throughout its total time period and not just where price is right now. So if price has reached its current level very gradually then the MA value will be very different compared with price reaching that same level very rapidly.

And which MA will one choose? For example, do you choose a 12,14,17,24,26,27,28,31 43 periods etc?
And which timeframe does one use (they all show the same current price but with different MA values)?

And which MA type should one choose? They will all give a different value at any one point in time.

HOWEVER!!! I think there is a usage for MA’s here which resembles S/R, which was mentioned by ForexGump above.

And that is the observation that whenever a certain MA -type/period (or any other indicator come to that!) is widely watched by a significant number of similar timeframe traders then there is a degree of self-fulfilment at that level.

But even then it is quite vague. @ForexGump mentioned:

but on which timeframes! Obviously, these MA-periods have different values on different timeframes. So one cannot say that the 200MA is a support level without specifying which TF and, indeed, which type of MA we are talking about: EMA? SMA? LWMA? etc, etc.

But if one can identify a certain MA period/type that is widely watched then it will tend to concentrate entries/exits closely around it and produce a reaction. But that reaction may be short-lived since it has no direct, meaningful relationship with the underlying factors currently pushing price. It is just acting as a localised magnet concentrating nearby activity towards the same level.

So to that extent, a commonly watched MA is a relevant level to consider in fine-tuning the choice of entry, stops and target levels in order to avoid getting accidently stopped out in the crowd or missing out on a fill on the wrong side of the crowd.

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Range trading is favorable because it allows traders to profit from predictable price movements within a defined range, buying low and selling high. It works well in sideways markets and offers a structured approach with potentially lower risk compared to trend trading.

Moving average actually makes the difference and I do use moving average and completely rely on it.

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I give much importance because this indicator helps me catch the market trend and also help me in recognizing the entry and exit point.

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May I ask why their crossover does not entice you?

But I don’t think people are referring to the conventional way SR levels are typically drawn. If you look at a trending daily chart and slap a 20SMA on there you’ll often see price bouncing off of it repeatedly:


Then price crossing over the SMA often signals a temporary change in direction.

Same thing with a 50SMA on a 4H chart:

These look like promising strategies, however in reality with this strategy alone you get more false signals than not. So, you would need to pay attention to price structure such as swing H/L’s as a place to put your SL.
If you were to have entered long at the bottom where price crossed the SMA, you could have rode that right to the top!

Isn’t hindsight a beautiful thing?

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I fully agree. Naturally, MA’s will always tag along behind the current price since they are calculated from the consecutive prices. And this can indeed be very useful in a trending markets. If one can pick an MAs value that matches the current momentum of the trend then it is a very useful tool for timing entries on pullbacks.

But in ranging markets its not going to function like that and can create a series of whipsaws.

As I mentioned above, if a particular MA period is watched by a sufficient number of traders then it will act like a magnet and pull all the entry and exits in towards it and make it look more like an S/R.

Yep! :smiley:
As always, the entry is the easy bit - its where to get out that is the real task! :slight_smile: - and what makes all the difference to the account P/L!

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Agree! Overloading on indicators is a total myth. If the price action doesn’t match a few MAs, it likely won’t match the rest either. But we need to test some of them.

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Moving average has always been my favorite trading indicators and I rely on this indicator much for trend identification.

Is it a part of your trading strategy?

Why is it your favorite indicator? Do you think it really helps in your trades?