Moving Averages and the Trend
Moving Averages Help Us Identify Trend Reversals
One of the old axioms of technical analysis is that 'the trend is your
friend'. This holds true, as long as you trade in the direction of the trend.
However, your 'friend' has two faces, and can turn on you to eliminate
profits (and your friendship!). Trend reversals can occur at any time and one
of the important skills a trader must possess is the ability to identify a
reversal. It is easy to exit a position too early if we over-anticipate a
trend reversal, and just as easy to watch our profits evaporate if we are too
slow to exit the trade.
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