What Are Moving Averages?

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Have you ever wondered what those squiggly blue lines on the chart are? Moving averages are perhaps the most used indicator out there for traders. I have seen traders who don't use averages, keeping them on the chart 'anyway' - That is how staple this indicator is. This video by RKSV's education arm 'TradeAcademy' explains what Moving Averages (MA) are. We use Hindustan Unilever as an example and calculate the MA.

 

You will notice how price behaves in a very peculiar way around certain Moving Averages. They, in fact, act as support and resistance to price. When the bull market is unleashed, some moving averages will act as the support during the falling markets. Just the opposite is true for bear markets.
Very frequently traders buy the stock when it touches the MA. Lesson Two is going to explore how moving averages act as support and resistance.