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Originally Posted by akforex
MOVING AVERAGE
The moving average is a follower,not a leader.It never anticipates,it only reacts.The moving average follows a market and tells us that a trend has begun,but only after the fact
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Averages are average. You correctly make the point that averages lag. However, I will go one step further to assert that averages don't do a good job of identifying trend, whether present or especially future. I will concede that averages do a fair job of identifying past trend. However, unfortunately we cannot trade the past.
Anyone who uses averages as a forecasting tool implicitly assumes they are good at future trend identification. From my testing I have not found that they are better than random at identifying future trend. I think most people look at averages on charts and focus on where they seem to work, but overlook where they don't. I think the almost universal fascination of newbies with averages is really at its core a perception problem.
Averages seem to work best on series that remain relatively stable over time. The ever changing forex price series does not fit this criteria.
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