Why is the 50DMA and 200DMA so important when trading stocks?
Let's dig in:
Let's dig in:
The 50-day moving average (50DMA) and 200-day moving average (200DMA) are popular technical indicators used by stock traders to analyze stock prices.
50DMA is a good short term indicator
200DMA is a good long term indicator
200DMA is a good long term indicator
50DMA:
The 50DMA is the average of a stock's closing price over the past 50 trading days, or two months.
It helps identify the short-term trend of a stock.
If a stock's current price is above the 50DMA, it is generally considered to be in an uptrend.
The 50DMA is the average of a stock's closing price over the past 50 trading days, or two months.
It helps identify the short-term trend of a stock.
If a stock's current price is above the 50DMA, it is generally considered to be in an uptrend.
200DMA:
The 200DMA is the average of a stock's closing price over the past 200 trading days (~or year).
If a stock's current price is above the 200DMA, it means that over the past year, most traders bought at a lower price and are now riding the trend up.
The 200DMA is the average of a stock's closing price over the past 200 trading days (~or year).
If a stock's current price is above the 200DMA, it means that over the past year, most traders bought at a lower price and are now riding the trend up.
Always think in terms the past 2 months or year: have traders been buying or selling above or below this price?
Traders who buy below the average want to see it rise.
They are likely to hold until a material change happens.
Traders who buy below the average want to see it rise.
They are likely to hold until a material change happens.
This is how it creates a trend.
Once the trend reverses and traders begin to take profits, and the price drops below the average, that is a good signal to get out.
Once the trend reverses and traders begin to take profits, and the price drops below the average, that is a good signal to get out.
In other words, move your stop loss up along with your favorite moving average, so you sell when the trend reverses.
These moving averages are important as they provide traders with a simple and easy-to-use indicator of a stock's trend.
By analyzing the relationship between a stock's current price and its 50DMA and 200DMA, traders can make informed decisions about buying or selling the stock.
By analyzing the relationship between a stock's current price and its 50DMA and 200DMA, traders can make informed decisions about buying or selling the stock.
There is still more to buying and selling stocks, but 50DMA and 200DMA should always be included in your charting and analyze.
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