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Trading Short-Term and Long-Term Price Period of Moving Average

A trader can choose to adjust the periods used to calculate the moving average.

 

If a trader uses short periods then the MA will react faster to the changes in price.

 

For example if a trader uses the 7 day MA then, it will react to price change much faster than a 14 day or 21 day MA would. However, using short time periods to calculate the MA might result in the indicator giving false signals (whipsaws).

7 day moving Average

7 day Moving Average

 

If another trader uses longer time periods then the MA will react to price changes much slower.

 

For example, if a trader uses the 14 day MA then the average will be less prone to whipsaws but it will react much slower.

14 day moving Average

14 day MA

 

21 day moving Average

21 day MA

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