Displacing a moving average is a practice used by traders to more accurately match the moving average with the price action. Furthermore, we all have experienced situations, where the price walks the trend line (as a support or resistance), but there are times where price will close slightly beyond the average.
Displacing a moving average involves shifting it to the left or right by a certain number of days. To displace a 10-day moving average by plus three days, you move the line representing the moving average to the right on the price graph by three days. A technical analyst uses displacement if, historically, the moving average has triggered buy or sell signals too early or too late. By visualizing where those same signals would have been generated if the analyst had used a displaced moving average, the accuracy of the analysis can be greatly enhanced.
Learn more about the types of moving averages ranging from simple (SMA) moving averages to exponential moving averages (EMA) to more complicated WVMA.
Displacing a moving average is a practice used by traders to more accurately match the moving average with the price action.
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