Module 1 of 2What the tools measureLesson 1 of 6
Moving averages: a lagging summary
What smoothing buys, and what it necessarily costs.
A moving average is the mean of the last N closes. That is all it is. It smooths noise, and the price of smoothing is lag — a 200-period average cannot tell you anything about the last 199 periods that it has not already averaged away.
This is why a moving average crossover is late by construction rather than by accident, and why no parameter choice fixes it. Used as a description of the prevailing direction it is honest work. Used as an entry trigger it is a bet that the move will continue long enough to pay for the delay.
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