The advantages of moving average are as follows:
Good smoothing effect: the moving average can smooth the fluctuation of stock price, reduce noise interference and better reflect the direction and intensity of the trend by averaging the stock price.
Easy to understand and use: EMA is an easy-to-understand technical analysis index, which is easy to understand and use. It does not need complicated calculation methods and professional knowledge, and is suitable for novices and long-term investors.
Wide application range: the moving average can be applied to various financial markets such as stocks, indexes and futures, and can also be applied to different time periods, with a wide application range.
However, the moving average also has some disadvantages:
Time lag effect: the moving average is a lag index, which is calculated based on past data and cannot accurately reflect the future trend, so it is prone to time lag effect.
Easy to be misled by false breakthroughs: Due to the lag effect of the moving average, it is easy to be misled by short-term price fluctuations, which leads to the emergence of false breakthroughs. Investors need to analyze it in combination with other technical indicators.
Parameter setting is difficult: the effect of EMA is related to parameter setting, and different parameters may have different effects on different stocks or indexes, which need to be tested and adjusted repeatedly.
To sum up, as a commonly used technical analysis index, the moving average needs to comprehensively consider its advantages and disadvantages in actual investment, and analyze it in combination with other technical indicators and fundamental analysis.