How reliable are moving averages?

How many traders even understand the logic of a moving average in itself?
What exactly and why are you trying to get the average of?

A made up example: Sam wants to know if his height is above the average, because he believes that height is what makes him either a good or a bad man.

Now suppose he is 17. And in grade 11 high school.
Would it make sence for him to collect the data starting from kindergarden and ending at university for all the males ? Or would it make more sence for him to gather the data for 17 year olds only approximately grade 9-12 ?

This is an impossible question to answer, because it's like asking how reliable a surgeon's instruments are...it depends whose using them. So put a few moving averages on someone's chart whose never used them before, and they'll be no help at all, but take a trader who has spent thousands of hours of trial and error in order to find the right combination, and those moving averages can be a devastatingly effective trading tool, for that person and that person alone. So really, " How reliable are moving Averages", cannot possibly be answered objectively.

"How reliable are moving averages?"

As reliable as any other lagging indicator, meaning: they are totally useless.
Nobody cares about them.

It all depends on your trading style that how you use Moving averages with analysis of the market. If you can not perform good task then do not blame on any indicator only.

I think they are good for following trend.

I'm using them only for technical analyse with other indicatores pivots, round numbers, TL's.
I'm a long term trader.

I'm watching also SMA on D1, W1, MN (200,365,500).
What is your opinion about using these values ?

Thank you for all answers.

Are MAs useful ?

It depends what you want to do.

want to code a trend following EA ? (and by "trend" I don't mean the M1 trend)
yes
want to trade breakouts ?
yes and no
want to trade momentum ?
no
want to trade hhs/lls ?
no

It works, the problem is not with it but with you. You want it to be what its not- A HOLY GRAIL.

When a price is below average, what does that mean?
When a price is above average, what does that mean?
When you see price come up to, go under, and bounce back off a moving average, what does that mean?
When you trade forex, you can go both ways. What does that mean?

What does a moving average indicate?

You tell me >

I know the answers, but I'm not giving them out for nothing.
I can't make this any easier for the reader to figure out for themselves however..

For example, In your day-to-day shopping, what do we call something that is being offered for sale at below average price?
When price goes below it's average - in any market - how does the market typically respond?

If you answered those two correctly, maybe now you will be able to explain to yourself as to why moving average crossover systems are doomed to fail.

There's nothing wrong with moving averages - but there could be in the way you understand them and use them.

To me... THEY DON'T LAG.

If price is significantly 'overbought' or 'oversold', then you might reasonably expect it to drift back toward a prior ('lagging') average. However, there are potential problems, for example:

1. Average is arbitrary, based on subjective perspective, e.g. what is the 'correct' average -- SMA? EMA? 10 period? 20 period? 100 period? Which timeframe? (In fact you could choose any 'average' price you wanted, and then work backward by choosing a suitable MA that 'fits' your chosen price!)

2. Fundamental shifts can cause moves (or 'trends') with potential longer term follow-through, making a prior average meaningless.

Some analysts attempt to use FA to establish 'fair value' for an instrument (then buy if price is currently below FV; sell if price is above). However, similar problems ensue:

1. FV is arbitrary, different analysts will use different measures in their attempt to calculate it.

2. FV is likewise constantly changing as different fundamental shifts occur. The analyst is firing at a moving target.

At least with FV the trader is using tool(s) that potentially operate independently of price, whereas with MAs he is merely comparing price with price. And if a fundamental shift occurs, then the trader potentially has an opportunity to cash in on any shift in FV, provided he can do so before the new value gets 'priced in' (but he is likely up against heavyweights with faster access to quality information, order-placement technology, institutional spreads, etc).

For proponents of EMH (I am NOT one of them, btw), price itself is lagging because the current price already incorporates and reflects all relevant info, and hence price itself represents FV (thus no bias or edge is possible from price-based analysis).

Personally, the only use I have found for technical indicators is where they summarize data or highlight a phenomenon that can't otherwise be seen by simply looking at the candle chart. Or in automated systems, where they can act as a proxy for a visual abstract that couldn't otherwise be quantified mathematically.

imho, moving averages are good if you use them to guide your direction and where they are in confluence with reaction or turning levels or zones. The wrong use of MAs lead to frustrating trading results.

KP

Yes, indeed there are issues.

As an indicator of FV, however, they are quite useful as training wheels because they do line up often quite reliably with FV.
FV is however better articulated by price action, and for doing that - horizontal lines are actually better and more accurate than moving averages.
To that end, you could say that moving averages are useless, but I tend to find that they help ease the visualization process - even though they are simply an indicator and not accurate at all.

I also think EMH is a load of bull.

Drop metatrader altogether and get sierra charts.
You can set the daily open as you wish

The Moving Averages are very profitable. The share of the winning traders, which uses MAs is about or over 95%. Unfortunately, there is a small group of idiots, who can't use MAs, 5% only can't actually...

So, now the big bankers don't know what to do with the traders, who are successfully using the MAs (95% are winners)...

These MA freak traders are pulling lots of cash out of the bankers' pockets... I know the major simple rule no.1, they use, to generate thier profits (which drive the bankers crazy and put them out of their balance):

When the MA points up - you buy.
When the MA points down - you sell.

That is it. Naked Forex...

#MAGA thru MAs + Bolinger Bands

Its all of odds stuff.. If trader using basic knowledge about TL, SR, Key levels etc.. , the MA is meaningful and reliable.

Sir, thanks, really thank a lot sir

I will say it’s just like any other indicator; it’s down to us using it. if we are using it properly and if we are using it in sensible way then we will be able to gain. So, we need to practice with indicator we want to use in real, as that is the only way forward for us to gain. As even the best of indicators are useless if misused, but can be path breaking if used accurately which is through practicing and all that.