Interpretation of Moving Average.

Background

Dear friends, when you go to trade any Security ( Cryptocurrency, Foreign Currency, Shares etc. ), you may have seen different types of charts are available. Today I am going to discuss one of them i.e Moving Average.

The Moving Average line is taken as the indicator of the trend. Moving Average smoothens the short term fluctuations and depicts the long term trend.

Interpretation of Moving Average.

Since the moving average reflects the trend, intersection of the actual price with the moving average signals at least pause in the trend by way of correction and possibly a trend reversal.

Upward

In an uptrend, both the price and the moving average are rising and price is above the moving average. If the prices were to move below the moving average while the moving average is still rising, it would probably signal just a correction.

After a while renewed buying usually pushes the price again over the moving average. If the moving average is still rising, such a crossover of the price over the moving average indicates resumption of the rising uptrend.

If the moving average has begun to move sideways a trend reversal is more likely. It is signalled when the price again crosses below the moving average.

Downward

In a downward, both the price and the moving average are falling and price is below the moving average. If the prices were to move above the moving average while the moving average is still falling, it would probably signal just a correction.

After a while renewed selling usually pulls the price again below the moving average indicates resumption of the downtrend.

If the moving average has begun to move sideways, a trend reversal is now more likely. It is signalled when the price again move above the moving average.

Thank you for reading.