This article has been translated from English to Gen Z Slang.
Moving averages are like the OGs of technical indicators, fam.
A moving average is just a chill way to smooth out those price dramas, helping ya spot what’s actually poppin’ in the market vs. the usual “noise”.
When we say “moving average”, it’s all about taking the average closing price of a currency pair over the last ‘X’ periods. Got it?
Plot it on a chart, and boom:
Peep that squiggly line? That’s the moving average flexing over the price, which looks like it’s drawn by ancient Japanese candlestick masters.
This rad technical indicator is what we call a “chart overlay“.
The moving average (MA) is like, totally vibing on the price chart! You feel me? 😎
Like, every technical indicator, the moving average (MA) is there to help us make sense of future prices.
Why not just stare at the price, right?
Well, here’s the tea: the real world, besides the sad truth of Santa being a myth…..trends don’t do neat lines.
The price be zipping and zagging, so a moving average helps calm that madness and shows you the real trend lurking below.
Look at that slope of the moving average, and boom, you’ve got the trend on lock.
Told ya, moving averages smooth out price vibes.
Lots of types of moving averages out there, and each got its own ratio of vibes to turbulence.
The smoother the blend, like slow tea, it reacts slower to the price tea being spilled.The choppier it moves, the faster it catches what’s popping in price land.
Want it smooth? Average those prices over more time, boo.
How to Choose the Right “Length” for Moving Averages
The “length” or how many periods are crammed into that moving average calc determines its vibe on your price grid.
The shorter the “length”, the closer it clings to the squad of current data points, staying tight and vibrant.
This means it’s less useful, giving less tea on the whole trend than what’s already on the gram of prices.
A longer “length” means it's composed of more data threads, so no single price swaggers the whole average too hard.But stack up too many data points, and it’ll get so chill you won’t even recognize a trend anymore!
In either case, spotting future directions could turn into a guessing game.
So, it’s high key important to choose the length (or periods) that match your trading style and keep you woke to market motions.
And now you’re probably thinking, “Ok, spill the details. How can I flex this in trading?”
First, we gotta break down the two main moving average fams:
- Simple
- Exponential
We’ll break down the receipts on how to calculate them and give you the 411 on the good and bad, no cap. Just like every lesson from BabyPips.com School of Pipsology, you’ve gotta know the basics, fam!
Once you’re tight with that info, like Messi is with his ball skills, we’ll show you all the lit ways to deploy moving averages in your trading strategy.
By the end, you’ll be as smooth as Messi’s dribble, trust.
Before bouncing to the next chapter, just remember: moving averages chill the price data to serve as a trend-following situational decoder.
They don’t prophesy the price future; they define today’s narrative with a lag, for real.
You ready, fam?If so, hit us with a “Heck yeah!”
If not, no biggie. Loop back and refresh yourself with the basics.
When you’re gassed up and ready to flex, slide into the next lesson.