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INTRODUCTION
Over the years traders have seen the birth of various technical analysis
methods to help them making stock trading easier and a lot more
effective. However, very few analysis methods have been as effective as
the Moving Average .
TIME
The main parameter of moving average is the period of time, in which
the moving average is calculated and drawn. Depending on the period in
study different moving averages can be used.
For e.g. when the price of a security that was in an uptrend falls below
a 50-period moving average, like in Figure below, it is a sign that the
uptrend may be reversing.
CONCLUSION
Moving averages are a powerful tool for analyzing the trend in a security.
They provide useful support and resistance points and are very easy to
use.
The most common time frames that are used when creating moving
averages are the 200-day, 100-day, 50-day, 20-day and 10-day. The 200day average is thought to be a good measure of a trading year, a 100-day
average of a half a year, a 50-day average of a quarter of a year, a 20-day
average of a month and 10-day average of two weeks.
Moving averages help technical traders smooth out some of the noise that
is found in day-to-day price movements, giving traders a clearer view of
the price trend.
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