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What are Moving Averages?

December 21, 2022 |
　　　

What are moving averages?

Moving averages are a technical analysis tool that traders use to smooth out price data and better understand the underlying trend of a stock or other asset. They are calculated by taking the average price of a security over a specified number of periods, and the resulting line is plotted on a chart to help traders see the overall direction of the trend and to identify potential buying and selling opportunities.

How are moving averages used by traders?

Traders use moving averages to help identify the direction of the underlying trend of a stock or other asset. A rising moving average line may indicate that the trend is up, while a falling moving average line may indicate that the trend is down. Traders can also use moving averages to identify potential support and resistance levels, as well as to confirm the strength of a trend or to identify potential trend reversals. For example, if a stock is in an uptrend and its moving average line is also rising, this may indicate that the uptrend is likely to continue. On the other hand, if the moving average line is flat or declining, this may suggest that the uptrend is losing momentum and that a reversal could be imminent.

How can I add moving averages to a chart in MT4 or MT5?

To add moving averages to a chart in MetaTrader 4 (MT4) or MetaTrader 5 (MT5), follow these steps:

  1. Open the chart for the currency pair, stock, or other instrument that you want to analyze.
  2. Click on the ”Insert” menu at the top of the chart and select ”Indicators” from the drop-down list.
  3. In the ”Indicators” window, scroll down until you find the ”Moving Average” and then double-click on it to add it to the chart.
  4. The moving average will appear on the chart as a separate window below the main price chart.
  5. You can customize the appearance of the moving average by right-clicking on it and selecting ”Properties” from the context menu. This will open the ”Moving Average” properties window, where you can change the color, line style, and other settings for the indicator.
  6. Once you have customized the moving average to your liking, click ”OK” to apply the changes and close the properties window. The updated moving average will be displayed on the chart.

Moving Average - MT5 chart picture
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