Moving averages help smooth out price fluctuations from "summary" of Charting and Technical Analysis by Fred McAllen
Moving averages are a popular technical analysis tool used by traders to analyze price trends. One of the key benefits of using moving averages is their ability to smooth out price fluctuations, making it easier to identify the direction of the trend. By calculating the average price of an asset over a specific period of time, moving averages help to filter out the noise in the market and highlight the underlying trend. When prices are constantly fluctuating up and down, it can be difficult to determine whether a trend is truly forming. By using moving averages, traders can get a clearer picture of the overall trend without being distracted by short-term price movements. This smoothing effect can help traders make more informed decisions about when to enter or exit a trad...
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