Price Action and the Simple Moving Average

 

Price Action and the Simple Moving Average

In last week's explanation of moving averages, we mentioned that though the exponential moving average seemed more relevant to projecting future price movement, prices tend to react off the simple moving average much more often. It seems counter-intuitive, but it's true!

Why? The simple explanation is that the simple moving average is by far the most commonly used indicator in trading. The big market makers (the banks) follow trends with this indicator, and in doing so, become the driving force behind much of the movement in the market.

You probably don't need us to explain why it could be wise to watch the same indicators as some of the biggest entities in the market. As always, though, we would encourage you to use the indicators that work best for you, and use them to confirm one another.

Good luck, and happy trading!

 

 

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