SubscribeOptimal Moving Average Positioning
Moving averages come in three kinds known as simple (SMA), weighted, or exponentially smoothed averages. An example of a 50-day moving average would be the last 50 days of a stock’s closing price added together, and then divided by 50. This procedure is repeated each day and forms a line.
Major moving averages can act as great supports for a stock. It can be like a magnet in the way a stock will bounce off it only to return to the moving average and bounce off it again.
On the other side of acting as a support, moving averages can also form a resistance. Once a stock has traded under a major moving, that average becomes a ceiling. This fact is especially true once the stock has fallen under its 200-day moving average. Some of the major moving averages include the 20-day, 40-day, 50-day, and 200-day moving averages. Other averages used that could be beneficial are a stock’s 10-day, 30-day, 40-day, and 100-day moving average.
This graph shows a typical setup when a stock is in good shape in an upward trend.
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