What is the primary use of Moving Averages (MA) in technical analysis?

The primary use of Moving Averages (MA) in technical analysis is to measure a trend. Moving averages are calculated by averaging a set of data points, typically prices over a specific time period, to smooth out price fluctuations and identify the underlying trend. Traders and analysts use moving averages to discern whether a security is in an upward, downward, or sideways trend by comparing the current price to the moving average line. This helps them make informed decisions about buying or selling based on trend direction.

While moving averages can provide insights into future price movements by indicating the momentum of the trend, their fundamental purpose is to assess and quantify the prevailing trend in the market. This is why they are widely utilized in various trading strategies, particularly those that operate on the principle of trend-following. Volatility assessment and financial statement analysis do not fall under the direct utility of moving averages, as they are focused more on price trends rather than emotional factors or company performance metrics.