Forex

A simple MA changes twice in response to each piece of data. First, it
changes when a new piece of data is added to the moving average. That is
good-we want our MA to reflect changes in prices. The bad thing is that
MA changes again when an old price is dropped off at the end of the moving
average window. When a high price is dropped, a simple MA ticks down.
When a low price is dropped, a simple MA rises. Those changes have nothing
to do with the current reality of the market.
Imagine that a stock hovers between 80 and 90, and its 10-day simple MA
stands at 85 but includes one day when the stock reached 105. When that
high number is dropped at the end of the 10-day window, the MA dives, as if

in a downtrend. That meaningless dive has nothing to do with the current
reality of the market.
When an old piece of data gets dropped off, a simple moving average
jumps. A simple MA is like a guard dog that barks twice - once when someone
approaches the house, and once again when someone walks away from
it. You do not know when to believe that dog. Traders use simple MAS out of
inertia. A modem computerized trader is better off using exponential moving
averages.