Chapter 7 · Technical analysis and timing
Moving averages in practice
The one indicator worth starting with, and what its lag really costs you.
41 of 50 · 7 min
A moving average against price
A moving average smooths price so direction becomes visible. Because it averages what has already happened, it necessarily turns after price turns. That is not a defect to engineer around — it is what an average is.
- A short average (20 periods) follows price closely and whipsaws often.
- A long average (200 periods) is slow and describes the larger trend.
- Price above a rising long average is the simplest definition of an uptrend there is.
- Crossovers are popular because they are easy to see, not because they are especially reliable.
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