Many times, you might have heard “Trend is your Friend”, this is true and Moving Average is one indicator, which help investors to find the correct trend. Technical analysis is platform where you can use many indicators to make patterns on charts. Moving average or simple moving average are the very common terms which analyst are using as their friend to guide them the market trend.
Moving average is also know are the smoothing agent, which remove the stock market price movement noise. Though moving average word seems easy and simple but there is much more hidden in it. As the biggest question is how to use moving average and what should we the setting for moving average. As this setting changes trader to trader depending upon their time frame. Below are the some of the settings and how to read when they cross each other.
- The best short plays trend strong enough to find resistance trying to overtake the 5 day ema.
- Above the 10 day is a short-term uptrend.
- Above the 50 day is a bullish indicator.
- Below the 200 day is a possible bear market indicator.
- The 10 day sma above the 20 day sma is a uptrend confirmation.
- The 50 day crossing below the 200 day is a bearish confirmation.
- The 50 day crossing above the 200 day is a bullish confirmation signal.
- Monster stocks will generally find support at the 50 day in bull markets.
- Monster stocks will generally find support at the 200 day in corrections.
- Charts don’t lie.