Which moving averages are better to use, simple or exponential?

Moving averages often act as an area of support in an uptrend or resistance in a downtrend. Yet, there are many times that a stock will blow right through an important moving average, leaving those who bought or sold short at that level with losses. Unless you are a systems trader, the correct way to utilize moving averages is as a visual reference point where there is the potential for support or resistance. Like any potential support or resistance area, a moving average gives us a reason to study price action more closely on a shorter time frame for actual evidence that the supply/demand relationship is changing.

So, here is the answer to a frequent question, whether you use simple or exponential moving averages is irrelevant. The simple and exponential moving average will generally be quite close to each other, and we will have plenty of time to observe the shorter term price action for evidence of trend change using either one. All the charts you see on Alphatrends are simple moving averages because that is what most people look at, and I am most interested trying to understand the psychology of the majority of participants.

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