Moving averages smooth the price data for forming a trend following indicator by defining the present direction with a lag. It is worthwhile to note that moving averages could be used by forex traders for ascertaining trend directions or defining potential support and resistance levels. They follow trends, which are the best friends of traders, and ensure that traders are in line with the current trend. It is very important for you to note that you should NOT indulge in selling at the top or buying at the bottom on the basis of moving averages as this analysis tool gives late signals.