Moving Averages

Question 1

A moving average is simply?

Answer 1

a way to smooth out price fluctuations to help you distinguish between typical market “noise” and actual trend reversals.

Question 2

By “moving average”, we mean that you are?

Answer 2

taking the average closing price of a currency pair for the last ‘X’ number of periods.

Question 3

Moving averages smooth out?

Answer 3

price action.

Question 4

Generally, the smoother the moving average, the?

Answer 4

slower it is to react to the price movement.

Question 5

The choppier the moving average, the?

Answer 5

quicker it is to react to the price movement.

Question 6

To make a moving average smoother, you should get the?

Answer 6

average closing prices over a longer time period.

Question 7

What are the two types of moving averages?

Answer 7

Simple and Exponential.

Question 8

A simple moving average is calculated by?

Answer 8

adding up the last “X” period’s closing prices and then dividing that number by X.

Question 9

With the use of SMAs, we can tell whether a pair is?

Answer 9

trending up, trending down, or just ranging.

Question 10

There is one problem with the simple moving average: they are?

Answer 10

they are susceptible to spikes.

Question 11

Exponential moving averages (EMA) give?

Answer 11

more weight to the most recent periods.

Question 12

When you want a moving average that will respond to the price action rather quickly, then a?

Answer 12

short period EMA is the best way to go.

Question 13

The downside to using the exponential moving average is that?

Answer 13

you might get faked out during consolidation periods.

Question 14

When you want a moving average that is smoother and slower to respond to price action, then?

Answer 14

a longer period SMA is the best way to go.

Question 15

One sweet way to use moving averages is to help you?

Answer 15

determine the trend.

Question 16

When price action tends to stay above the moving average, it signals that?

Answer 16

price is in a general UPTREND.

Question 17

If price action tends to stay below the moving average, then it indicates that?

Answer 17

it is in a DOWNTREND.

Question 18

If the moving averages cross over one another, it could signal that?

Answer 18

the trend is about to change soon, thereby giving you the chance to get a better entry.

Question 19

Another way to use moving averages is to

Answer 19

dynamic support and resistance levels.

Question 20

The area between moving averages could be considered as?

Answer 20

a zone of support or resistance.

Question 21

A moving average ribbon is a?

Answer 21

series of moving averages of different lengths plotted on a chart.

Question 22

The basic idea behind the concept of “moving average ribbons” is?

Answer 22

instead of using one or two moving averages on a chart, you are using a bunch of t moving averages, usually between 6 to 16 moving averages (or more).

Question 23

The responsiveness of the moving average ribbon can be adjusted by:

Answer 23

Changing the number of time periods used in the moving average. Changing the type of moving average from a simple moving average (SMA) to an exponential moving average (EMA).

Question 24

The shorter the number of periods used when selecting which MAs to add on your chart, the more?

Answer 24

sensitive the moving average ribbon is to slight price changes.

Question 25

Using moving averages with larger numbers of periods (like 200) are?

Answer 25

less sensitive and smoother.

Question 26

When the moving averages start widening out and separating, also known as ribbon “expansion”, this signals that?

Answer 26

that recent price direction has reached an extreme and could be the end of a trend.

Question 27

When the moving averages start to converge and get closer to each other, also known as ribbon “contraction”?

Answer 27

a trend change has possibly started.

Question 28

When the moving average ribbons are parallel and evenly spaced, this means that?

Answer 28

the current trend is strong.

Question 29

The positioning of short-term moving averages relative to long-term moving average shows the?

Answer 29

DIRECTION of the trend (down, neutral, up).

Question 30

The spacing between the moving averages shows the?

Answer 30

STRENGTH of the trend (weak, neutral, strong).