Moving averages without the mystery

A moving average is the average closing price over a set number of candles, recalculated with each new candle. It smooths out the noise so you can see the direction.

An EMA (exponential moving average) gives more weight to recent candles, so it reacts a little faster than a simple average.

The two most watched

• 50 period: the shorter term direction.
• 200 period: the longer term direction.

Price above both suggests buyers are in control. Price below both suggests sellers are. Price between them usually means the market hasn't made up its mind.

What they don't do

Moving averages lag. They describe what has happened, not what will. In a choppy, sideways market, price will cross back and forth over them constantly, and those crossings mean very little.

How the checker uses them

For a buy, price above both averages counts for you, and below both counts against you. Between them is neutral. For a sell it's the other way round.

Key points

• Moving averages show direction by smoothing out noise.
• They lag, so treat them as context, not as signals.
• They're most useful in trending markets.