How To Trade Moving Averages and Spot Trend Reversal

Learning the basic of technical analysis – Moving Averages. This is the part 1 of the video made by Trading 212. If you want to improve your technical analysis skill, you should start learning the basics.

How to Trade Moving Averages

The Moving Average is one of the most commonly used technical indicators. If you’ve spent even a little time looking at price charts, you will have noticed that most often the price of an instrument will move up and down.

In fast-moving markets, you may find that the price may be surging up only to plummet moments later before surging up again, increasing the potential for false signals.

The moving average can help filter out the noise from random price movements and smooth it out in order to see the average value.

Moving averages are used to identify trends and confirm reversals. When the price is above the moving average line we consider the instrument to be in an uptrend. Conversely, if the price is below the moving average line we consider it to be in a downtrend. The breaking of the moving average line usually implies a trend reversal.