Simple usage of stock chart moving averages
How to use these simple
technical stock indicators ?
Moving averages are a very popular technical stock indicators and a very powerful tools used in stock chart analysis.Let’s start with calculation principle. A stock chart moving average (MA) is a curve that is plotted to the chart. The value of the last plotted point is the average based on the last x values of the price. When you learn about 20 days MA, it means that it used the last 20 days for calculation of the last value. The most common types of these technical stock indicators are simple averages and exponential average. The difference between them is only in the principle, that exponential averages also add weight to values. It means that yesterday’s value is more important than the value from the day before yesterday.
How can be used
this technical analysis indicator ?
As moving level of support or resistanceLook at the chart below:
To plot this technical analysis indicator on a chart, you need to define the period of the average. I like to use a 20-day exponential MA (blue on chart above), a 50-day exponential average (green) and a 200-day simple average (pink).Use type and periods you like, but these values (20, 50, 200) are the ones used most, and I find them good enough for stock chart analysis.
! My stock market chart tips: - choose color as you like
- for a chart of a stock day trading system you could use shorter periods (e.g. 9-day period MA)
The second important usage of this technical analysis indicator is that
they can help you to identify trends. This type of usage of MAs is described on my pages about
uptrend
,
downtrend
and
trading range.
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