Moving Average and its Application on charts

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Moving averages are one of the most popular and easy to use tools available to the technical analyst. They smooth a data series and make it easier to spot trends, something that is especially helpful in volatile markets.

๐”๐ฌ๐ž๐ฌ ๐จ๐Ÿ ๐ฆ๐จ๐ฏ๐ข๐ง๐  ๐š๐ฏ๐ž๐ซ๐š๐ ๐ž๐ฌ:

There are many uses for moving averages, but three basic uses stand out:

  1. Trend identification / confirmation
  2. Support and resistance level identification/confirmation
  3. Generating Buy and Sell Call

The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).

The Simple Moving Average is the most popular technical analysis tool used by traders. The simple moving average formula is calculated by taking the average closing price of a stock over the last โ€œxโ€ periods. The Simple Moving Average (SMA) is used mainly to identify trend direction but is commonly used to generate buy and sell signals.

๐€๐ฉ๐ฉ๐ฅ๐ข๐œ๐š๐ญ๐ข๐จ๐ง ๐จ๐Ÿ ๐ญ๐ก๐ž ๐Œ๐จ๐ฏ๐ข๐ง๐  ๐€๐ฏ๐ž๐ซ๐š๐ ๐ž:

  1. If the Price is above the moving average the trend is UP as long as the angle of the Moving average is ascending (in upwards direction). And vice-versa for a downtrend.
  2. A Crossover of a short-term MA above the Long term MA Indicates an uptrend continuation or a new trend confirmation, but here also the strength is gained once both the MAs are ascending. And vice-versa for a downtrend.
  3. If the direction of the MAs are ascending or moving upwards, the MAs will act as a Dynamic Support, and vice-versa for a downtrend.
  4. When the price crosses a long-term MA for eg, 200MA or 100MA, we may get an early Signal for reversal.

๐‘ด๐’๐’”๐’• ๐‘ฐ๐’Ž๐’‘๐’๐’“๐’•๐’‚๐’๐’• ๐’˜๐’‰๐’Š๐’๐’† ๐’•๐’“๐’‚๐’…๐’Š๐’๐’ˆ ๐’˜๐’Š๐’•๐’‰ ๐‘ด๐’๐’—๐’Š๐’๐’ˆ ๐’‚๐’—๐’†๐’“๐’‚๐’ˆ๐’†๐’”, ๐‘ฐ๐’‡ ๐’•๐’‰๐’† ๐’‘๐’“๐’Š๐’„๐’† ๐’Š๐’” ๐’•๐’๐’ ๐’‡๐’‚๐’“ ๐’‡๐’“๐’๐’Ž ๐’•๐’‰๐’† ๐’Ž๐’๐’—๐’Š๐’๐’ˆ ๐’‚๐’—๐’†๐’“๐’‚๐’ˆ๐’† ๐’‚๐’๐’… ๐’•๐’‰๐’† ๐’‚๐’๐’ˆ๐’†๐’ ๐’Š๐’” ๐’‚๐’”๐’„๐’†๐’๐’…๐’Š๐’๐’ˆ, ๐’•๐’‰๐’†๐’ ๐’˜๐’‚๐’Š๐’• ๐’‡๐’๐’“ ๐’•๐’‰๐’† ๐‘ด๐‘ฌ๐‘จ๐‘ต ๐‘น๐‘ฌ๐‘ฝ๐‘ฌ๐‘น๐‘บ๐‘ฐ๐‘ถ๐‘ต ๐’•๐’ ๐’•๐’‰๐’† ๐‘ด๐’๐’—๐’Š๐’๐’ˆ ๐’‚๐’—๐’†๐’“๐’‚๐’ˆ๐’†, ๐’๐’†๐’• ๐’•๐’‰๐’† ๐‘ด๐‘จ๐’” ๐’‚๐’„๐’• ๐’‚๐’” ๐’•๐’‰๐’† ๐’”๐’–๐’‘๐’‘๐’๐’“๐’• ๐’‚๐’๐’… ๐’•๐’‰๐’†๐’ ๐’†๐’๐’•๐’†๐’“ ๐’•๐’‰๐’† ๐’…๐’Š๐’“๐’†๐’„๐’•๐’Š๐’๐’ ๐’˜๐’Š๐’•๐’‰ ๐’‚ ๐’ƒ๐’†๐’•๐’•๐’†๐’“ ๐‘น๐‘ฐ๐‘บ๐‘ฒ-๐‘น๐‘ฌ๐‘พ๐‘จ๐‘น๐‘ซ.

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