Moving Average Method : Learn the Secret of Stock World
Earn Great Profits in Stock with Moving Average Method
The moving average method is an effective trend tracking technique used by many investors. Because it is simple to use and implement, many investors have become an important part of the strategy.
What is Moving Average Method
Almost all successful investors use the moving average method. This method is useful to determine the future price orientations by taking the averages of prices within a certain time interval.
in the average, this method collect the price and the total number of days divided. The main objective of moving averages is to make price trends more understandable by reducing them to a lean line. They help to identify support and resistance points.
If the price is below the moving average, it means that the moving average is in the resistance position. When the price is above the moving average, it indicates that the moving average is in the support position.
The principle generally applied in the analyzes using a single average; where the prices exceed the average (bull market) to open the buying position, when the average (bear market) is in a position to open sales position. In binary use, investors see the short-term average to cut the long-term average upwards. Also they cut it down as a sales signal.
The moving averages have two types simple moving average and exponential moving average.
Simple Moving Average
Simple moving average = is calculated by dividing the total value of the closing price by the time interval. For example, a 5-day average is calculated, 5 days of closure is collected and divided by 5.
Exponential Moving Average
The most used moving average type is an exponentially calculated moving average. They produce a healthier signal than simple moving averages. Today’s emerging price is added to yesterday’s exponential moving average with a determined percentage. Besides, today there is an exponentially moving average. Thus, the closing prices will be given more weight.
While calculating percentage with exponentially moving medium; 2 (1 + the specified period of time of the moving average) formula is used. For example, 2 (1 + 21) = 0.09 for 21-day period
The most important issue when interpreting the moving average is to determine the period. If the period of the technical graph is short, it will generate more frequent signals at moving average price changes. If the moving average is taken too long, the average will be behind the price.
The moving average periods frequently used in short, medium and long term analyzes are given below.
Short Term 7 and 14 days
Medium Term 22 and 50 days
Long Term 100 and 200 days
As a result,
Before you make your investment decisions, determine your level of sales and stop your loss. Review the daily, weekly, hourly, or even 15-minute graphs rather than focusing on a single time-frame when running a technical analysis.
You can always be in the side of the trend, it may cause you to stand against the trend direction. And most importantly, never buy an emotional bond with your deed. Don’t leave professionalism.