In the universe of futures trading and technical analysis, moving averages stand as the cornerstone for most traders, providing invaluable insights into market trends and trader sentiment.
These mathematical tools help smooth price data by creating a constantly updated average price, which reduces price fluctuation noise in a chart and allows traders to focus on pure price trend identification.
Watch this video to learn about the various types of moving averages and unique calculations.
Additional topics discussed in this free livestream:
The core technical analysis concept of moving average indicators
How to add and format moving average indicators in your NinjaTrader charts
How to use moving averages to visualize and identify trends, inflection points, or reversal points
How to interpret the built-in multi-moving average ribbon indicator
What is a Simple Moving Average (SMA)?
The SMA is one of the most straightforward and commonly used types of moving averages in technical analysis. It calculates the average price over a user-determined number of bar periods, assigning equal weight to each price point. For example, a 20-day SMA would add the closing prices of the last 20 bars and divide by 20.
Learn more about SMA, the backbone of technical analysis.
What are Exponential Moving Averages (EMA)?
The EMA takes the concept of moving averages a step further by placing more weight on recent prices. This sensitivity to newer information makes EMAs quicker to react to price changes than SMAs, which can be advantageous in fast-moving markets.
Read more about EMA, a pillar of technical analysis.
What are Multiple Moving Averages and Moving Average Ribbons?
When multiple moving averages with different time frames are used together, they form what’s known as a moving average ribbon. This technique involves plotting several EMAs or SMAs of varying lengths on the same chart, creating a "ribbon" effect that reflects the dynamics of both short-term and long-term trends. This layered approach can help traders better discern the strength and direction of market trends.
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