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Moving Average

You can add the Moving Averages to the chart by clicking the MA button in the Indicator Panel. The tradevision platform introduces 4 levels of Moving Averages: 

20 MA (Short-Term Moving Average):

  • Represents short-term price action.
  • Reacts quickly to price changes, making it useful for short-term traders.
  • Often used in combination with longer MAs to identify short-term trends.

50 MA (Medium-Term Moving Average):

  • Represents medium-term price action.
  • Balances responsiveness and smoothness, making it popular among swing traders.
  • Often used to confirm trends or as a dynamic support/resistance level.

150 MA (Long-Term Moving Average):

  • Represents long-term price action.
  • Less responsive to short-term price fluctuations, making it useful for identifying long-term trends.
  • Often used by investors to assess the overall health of a trend.

200 MA (Very Long-Term Moving Average):

  • Represents very long-term price action.
  • Known as the "gold standard" for identifying long-term trends.
  • Widely watched by traders and investors to determine whether an asset is in a bull or bear market.


What is a Moving Average?


A moving average is a tool that helps you understand the direction of a stock or asset’s price over time. It smooths out the ups and downs in price to show you the overall trend. Think of it as a way to see the "average" price over a certain period.

There are two main types of moving averages:

  1. Simple Moving Average (SMA): This is the average price over a specific number of days (e.g., 10 days, 50 days).
  2. Exponential Moving Average (EMA): This gives more importance to recent prices, so it reacts faster to price changes.

Why Do Traders Use Moving Averages?

Moving averages help traders:

  • Identify Trends: Is the price going up, down, or sideways?
  • Find Support and Resistance: Moving averages can act as levels where the price might bounce or reverse.
  • Reduce Noise: They smooth out price movements, making it easier to see the big picture.

How to Use Moving Averages for Trading

Here are some simple ways traders use moving averages to make decisions:


1. Price Crossover

  • Buy Signal: When the price crosses above the moving average, it could mean the price is starting to go up.
  • Sell Signal: When the price crosses below the moving average, it could mean the price is starting to go down.

2. Moving Average Crossover

This strategy uses two moving averages: a short-term one (e.g., 10 days) and a long-term one (e.g., 50 days).

  • Buy Signal: When the short-term moving average crosses above the long-term one (called a "golden cross").
  • Sell Signal: When the short-term moving average crosses below the long-term one (called a "death cross").

3. Using Moving Averages as Support or Resistance

  • In an uptrend, the moving average can act as support. This means the price might bounce off the moving average and continue going up.
  • In a downtrend, the moving average can act as resistance. This means the price might struggle to go above the moving average and continue going down.

4. Slope of the Moving Average

  • If the moving average is sloping upward, it means the trend is up.
  • If the moving average is sloping downward, it means the trend is down.
  • If the moving average is flat, it means the price is moving sideways.

Limitations of Moving Averages

While moving averages are helpful, they’re not perfect:

  • Lagging Indicator: They are based on past prices, so they might not predict future movements perfectly.
  • False Signals: In choppy or sideways markets, moving averages can give misleading signals.
  • Not Great for All Markets: They work best when the price is trending (going up or down steadily) and may not work well in volatile or range-bound markets.

Tips for New Traders

  1. Start Simple: Use a single moving average (e.g., 50-day SMA) to get a feel for how it works.
  2. Combine with Other Tools: Use moving averages with other indicators like the RSI or MACD to confirm signals.
  3. Practice: Test your strategy on historical data or a demo account before trading with real money.
  4. Adjust for Your Style: Short-term traders might use shorter moving averages (e.g., 10-day), while long-term investors might use longer ones (e.g., 200-day).