The Limitations Of Using Moving Averages That No One Talks About
In today’s world trading has changed so much that there are people who trade even without knowing how the market works. The market already has its risks. And without working on their risk management strategies to tackle these market risks some traders simply start using trading bots like Infinity App. These bots are again risky because they only work based on technical analysis. And there would be a predefined set of indicators being used by the bots to make trading decisions. Moreover, with the rigorous marketing strategies adopted by most bot makers, it is hard to find a credible Infinity App review or review about any trading bot for that matter. Simulated results that look real, false claims about making you rich with a very small investment, the list goes long when we talk about the many ways in which bot trading fools traders. It is not just about bot trading that exaggerations prevail but also about some of the most common trading methodologies. Take moving averages for example – there are many traders who have indeed made huge profits using this method. But like every other strategy in trading, this one is not flawless. The real trouble is that most people only focus on the positives. Here are some of the limitations of using moving averages that you should be aware of –
Past and present do not always talk about the future
With the stock market, there are so many external factors that can change the situation upside down in an instant. So if you blindly believe that moving averages taken for a longer duration would give you a clear picture of the future price trends then think again. Most people check their strategies with the historical data to find whether correct results are being calculated. But one thing about trading is that historical data can never be accurate indicators of the real-time market conditions.
Relying too much on one indicator is the problem
We are not telling that moving averages are bad. But the truth is that there is the probability of these indicators to fail as well. It is thus an unrealistic claim to generalize the claim that you can make profits when you use moving averages. If you wish to mitigate the risks then you could club the moving average results with other trading signals you gather and make a cumulative prediction of the price changes that are likely to occur.