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How to get the best out of moving averages when trading the stock market

by , 12 October 2015

Moving averages are a really handy technical indicator to use when trading the stock market.

You can use moving averages to see what the market trend is, and to find levels of support and resistance.

So how can you pick the best moving averages to use?

Read on to find out…


Finding the best moving averages to use


Unfortunately there isn’t one moving average which works perfectly with every stock on the market. If there was it would make trading the stock market much easier.

You’ll have to play around with moving averages over different durations to find the best moving averages to use for particular stocks.

Plot different moving averages, for example, the 50 day moving average and 200 day moving average, and see how the price reacts. Then you can use the best suited one when you trade a particular stock.

You can use the resulting support and resistance levels to trade in and out of the stock market.


Using two or more moving averages


You can use two or more moving averages together on your price charts. With the 200 day moving average being the most commonly used, you could pair it with the 50 day moving average.

By combining a shorter-term moving average and a longer-term moving average, you can generate entry and exit signals.

For instance, by plotting the 50 day moving average and the 200 day moving average, when the 50 day crosses up through the 200 day moving average, this is a bullish signal. On the other hand, if the 50 day crosses below the 200 day moving average, this is a bearish signal.

You could even consider using shorter timeframes, for example the 10 and 30 day moving averages together.

So there you have it. How to get the best out of moving averages when trading the stock market.

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How to get the best out of moving averages when trading the stock market
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