Every Trader Uses This Technical Indicator (MA Trading School)
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\n\nDefinition: average price of a stock over the course of a designated time period
\nFor example: a 20 Day SImple MA is the average price of the underlying security (stock) over the last 20 days
\nWhy do we use them:
\nBy calculating the moving average, the impacts of random, short-term fluctuations...sometimes called whipsaws, on the price of a stock over the desired time-frame are
\nThe most commonly used types are simple and exponential.
\nSimple is just that, an average over the time period
\nExponential is essentially the same except it more heavily weighs more current prices (more accurately captures at the moment sentiment)
\nMost commonly followed MA on the street are the 20-day, 50-day and 200-day.
\nAlgorithms are programmed to act at those indicators as well
\nHumans are emotional. Even those that set the computer algorithms, they choose their programming also based on emotions.
\nIndicators are simply a measure of emotion and momentum of participants (which I\u2019ll say again and again throughout these episodes)
\nSo, knowing where buyers and sellers have been active in the past (based on the averages over a period) helps give you an indication of where they may be likely to engage again.
\nTimeframes suit the individual. Typically, investors utilize longer period MA where short-term traders make use of short-term price action to scalp profits.
\nIf you\u2019re curious, the moving averages I use are:
\n8 SMA, 20 SMA, and 200 SMA
\nShort term, medium and long term.
\nWhen the averages are pointing up, I\u2019m bullish. When they\u2019re pointing down, I\u2019m bearish. And when they\u2019re flat I sell credit spreads
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