A thread on the 200-day moving average and how to use (200 DMA).
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A moving average is a way to track the average price of a stock over a certain amount of time. The 200 DMA looks at the average price over the last 200 days.
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The 200 DMA is usually seen as a long-term indicator. Traders and investors use it to identify trends and make buying or selling decisions. 200Days signifes approx a year time.
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When the current price of a stock is higher than its 200 DMA, it is usually considered to be in an upward trend. When the current price is lower than the 200 DMA, it is usually considered to be in a downward trend.
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The 200 DMA can also be used as a level of support or resistance. When the stock price gets close to the 200 DMA, it may have difficulty breaking through, which can lead to a potential change in the stock's price.
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Support & Resistance are formed on 200 Dma as many investors and fund managers uses the 200 Dma as a rule for buying & selling stocks
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However, standalone 200 Dma use should be avoided and should be used with other analysis, indicator & patterns
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200 Dma combined with TREND REVERSAL price action pattern becomes a very powerful signal to trade. One can go option long or make a debit spread to capture this signal.
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