10 Reasons Moving Averages Work

10 Reasons Moving Averages Work
The 10-day and 20-day exponential moving averages.

10 Reasons moving averages work as trading tools.

  1. Moving averages filter trends in different timeframes.
  2. Moving averages can create entry signals at the beginning of a trend.
  3. They can be used as exit signals when price dips below them.
  4. Moving averages can be used as trailing stops so you can exit with profits when a trend starts to bend.
  5. Moving averages can be used in crossover combinations for slower signals.
  6. Moving averages can help filter volatility.
  7. You can do historical back tests of price action to develop price action trading systems using moving averages.
  8. Moving averages are reactive technical trading tools not predictive.
  9. When price falls below and then breaks back over a moving average it is a great signal for a potential reversal.
  10. Moving averages are better gurus than talking heads on financial television.

Moving averages have a place in any trader’s or investor’s strategy. They are my favorite filter for price action.