The Moving Average is thus calculated by adding up all the values of the data points of the security and dividing it with the total number of data points.
the Moving Average meaning is determined by the past price values of a security.
How to use to identify for Uptrend and Downtrend ?
1)If the Moving Average for a security is angled upwards, its price values are or have recently been rising. This denotes an upward trend.
2)On the other hand, a downward angled Moving Average denotes a fall in price or a downtrend.
Types of Moving Averages:-
Simple Moving Average: The most commonly used form of Moving Average in technical analysis is the Simple Moving Average. It is calculated by taking the mean of a set of values (mostly, prices of a security) and dividing it by the number of values. It can be calculated as follows:
(A1 + A2 + A3 + A4…An) / n = SMA Where n is the number of time periods and A is the average within a given time period.
The most common periods for Simple Moving Averagetracking are 8, 20, 5o, 100 and 200 days or periods.
– Exponential Moving Average: The other type of Moving Average is known as the Exponential Moving Average. This is a weighted form of calculating Moving Averages, whereby recent price values are given more weight than past price values.
Note:- Exponential Moving Averages adapt better and faster to changing price movements than Simple Moving Average.
Note:- it is recommended that Moving Averages should be used in conjunction with other Indicators like rsi and macd to form an accurate.
A Crossover is a Trading Strategy. :-
It is based on moving average of different time frames. This
trading pattern is used by traders to identify the short term market trend.
Mostly intraday, BTST(Buy Today, Sell Tomorrow) trader and Swing traders use this indicator to take Buy or Sell call.
Crossover Trading Strategy:-
Cross over is generally used by traders in 2 different time frames.
20 Day Moving Average:-
The most popular crossover time frame is a 20-day moving average.
a)If a particular stock falls below its 20-day moving average indicates a bearish trend and
b)if the stock cross above its 20-day moving average indicates the bullish trend.
2 Moving Average cross over Strategy :-
1)When 7-day moving average cross above 21-day moving average indicates a
bullish trend or uptrend and expected to form the higher high and lower low
2)If a 7-day moving average falls below the 21-day moving average indicates a
bearish trend or downtrend and expected to form a lower high and lower low