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Tagged: Moving Average
What is Moving Average?
Moving Average is the indicator that can be applied for analysis with trending zone. This indicator basically smoothen the trend with the average price value previous 21 days. The trend will be positive as long as the current price is above the average and negative when it goes below the average.This indicator does not help during the non trending period.
A moving average is an indicator that calculates the average price of a security over a specified number of periods. If a stock/security is exceptionally volatile, then a moving average will help to smooth the data. A moving average filters out random noise and offers a smoother perspective of the price action.By applying a 21-days simple moving average to the price action, random fluctuations are smoothed to make it easier to identify a trend.
Moving average is a trending indicator. When the price moves above the moving average the trend is bullish and when it moves below moving average then the trend is bearish.
MOVING AVERAGE _ MA is a trend following/lagging indicator based on the average closing prices of the stock This is called simple moving average
The most common applications are
(a)TO identify the trend direction
(b)To find the support and resistance levels
FOR short term trader 21 DMA is enough where as for long term trader 200 DMA is required since MAs lag current price the longer the time the greater the degree of lag( ie 200 DMA will have more degree of lag than 21 DMA)
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