Prior to moving into trading full time I spent a number of years with a leading global home improvement company. One thing I learned in that culture is that a tool that serves multiple purposes is worth its weight in gold. Multipurpose tools are economical, time efficient, and allow you to accomplish much more than you planned due to its versatility.
In trading terms, one of the best multipurpose tools is the moving average – the average price data of a stock or ETF over a specific time period.
As I showed you recently, you can use a stock’s Simple Moving Average (SMA) to determine its direction. If the moving average line is on an incline going up from left to right, it tells you the stock is in an uptrend. If it slopes down from left to right, it tells you the stock is in a downtrend.
But this versatile technical trading indicator is like a Swiss Army knife for traders… and it is one of the go-to technical indicators in my trader’s tool chest.
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