Moving average is probably one of the most basic topics in trading. People charge 10-20K just to teach basic stuff about it.
Here's a thread to learn it for free:- ๐งต
Here's a thread to learn it for free:- ๐งต
1. A moving average is an average of a stock's price over a period of time like 10 day, 20 day, 50 day, etc.
2. It can be used in identifying trends, the basic idea is if market crosses it's average price to any side it can indicate a change in the nature of trend.
The timeframe can be anything like 10 day can be used for short term trends and 50 day can be used for long term trends.
The timeframe can be anything like 10 day can be used for short term trends and 50 day can be used for long term trends.
3. It can be used as dynamic support or resistance For Ex - If you use it on any stock which is in momentum you will find that it usually respects the moving averages a lot of the time.
4. It can also be used as a mean reversion tool. When prices stretch too much on any side there is usually a mean reversion move in the opposite side.
You can use it to identify those stretched moves like if price is 30% away from 10 day it can be considered as a stretched move
You can use it to identify those stretched moves like if price is 30% away from 10 day it can be considered as a stretched move
5. It can also define the strength of the trend with it's slope. Like you will usually see the slope of the moving average flattening when the market or the stock is in sideways mode and a 45 or 90 degree slope when the stock is trending depending upon how strong the trend is.
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You can also check out my last thread on Dan Zanger's Techniques.
You can also check out my last thread on Dan Zanger's Techniques.
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