How To Trade - Trading short term and long term Moving Averages

There are 4 types of MA:

1. Simple moving average
2. Exponential moving average
3. Smoothed moving average
4. Linear weighted moving average

Trader can choose the periods used to calculate the moving average. If trader uses short periods then MA will react faster. For example if trader uses 7 day MA, it will react to price change faster than a 14 day or 21 day MA would. However, MA might result in the indicator giving false signals.

If another trader uses longer time periods then the MA will react much slower. For example, if traders use 14 day MA so it will react much slower.

The moving averages can be used for various task, but it is suggested that they are used with other technical indicators. The great thing about moving averages is that they simplify data for the eyes.

1. Support - look for price reversing when it moves close to a longer term moving average line.
2. Resistance - when the price comes close to the line of moving average, traders will sell in hopes of taking profits at the top of a natural resistance level.
3. Crossover - Moving averages can be used as basic buy/sell points by detecting crossovers when the moving averages line crosses above and below the price bars
   
4. Crossover on Moving Average Ribbons - When two different moving averages crossover one another, this can signal a possible reversal.