Basically, the moving averages such as the Simple Moving Average (SMA) and Linearly Weighted Moving Average(LWMA) are a set of numbers, each of which is the average of the corresponding subset of a larger set of data points. The averages are easy to understand and can be used “as is” by the beginners of forex.

The simple moving average (SMA) or arithmetic mean is the average of a predetermined number of prices over a number of days, divided by the number of entries. As opposed to that the linearly weighted moving average(LMWA) assigns more weight to the more recent closings. This is achieved by multiplying the last day's price by one, and each closer day by an increasing consecutive number.

A moving average or simple moving average (SMA) is an average of a predetermined number of prices over a number of days, divided by the number of entries. The higher the number of days in the average, the smoother the line is.

A moving average makes it easier to visualize currency activity without daily statistical noise. It is a common tool in technical analysis and is used either by itself or as an oscillator.

The modern monetary theories on short-term exchange rate volatility take into consideration the short-term capital markets' role and the long-term impact of the commodity markets on foreign exchange. These theories hold that the divergence between the exchange rate and the purchasing power parity is due to the supply and demand for financial assets and the international capability.

Read more: Modern Monetary Theories on Short-Term Exchange Rate Volatility

The Fibonacci analysis gives ratios which play important role in the forecasting of market movements. This theory is named after Leonardo Fibonacci of Pisa, an Italian mathematician of the late twelfth and early thirteenth centuries He introduced an additive numerical series - Fibonacci sequence.

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