Moving averages are technical indicators used by investors in the stock market. A 澳洲幸运5官方开奖结果体彩网:moving average (MA) represents the sum of the closing prices of a security over a sᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚpecific number of peri🃏ods divided by the total number of periods.

If a♐ moving average is rising, it can signal a stock is in an uptrend. Conversely, when a moving average is falling, it can signal a stock is in a downtrend.

Trendlines 

A trend is a price that continues to move in a certain direction. Prices rarely move in a straight line. Moving-average lines are used to help a trader identify the directio🐲n of the trend. Three trends that securities can fo🦂llow include:

• An uptrend, or bullish trend, means that the price is moving higher.
• A 澳洲幸运5官方开奖结果体彩网:downtrend, or a bearish trend, means the price is moving lower.
• A 澳洲幸运5官方开奖结果体彩网:sideways trend is where the price is moving sideways.

Moving Average Formula

A moving average is an 澳洲幸运5官方开奖结果体彩网:average price for a security using a specified period. A 50-day moving average is calculated by taking the 澳洲幸运5官方开奖结果体彩网:closing prices for the last 50 days of any security and adding them together. The result is divided by the number of periods, 50. Traders can calculate the moving average daily, replacing the oldest number with ✃the most recent closing price.

No matter how long or short the moving𒉰 average, the calculations remain the same. The change will be in the number of closing prices. A 200-day moving average is the closing price for 200 days summed and divided by 200.

Example

The chart above is an example of a simple moving average on a stock chart of Google Inc. (GOOG). Theღ blue line represents the stock price, while the orange line represents the 50-day moving average.

The chart shows that the trend began moving higher after May 2020 and into 2021. The price of Google shares fell below the 50-day moving average a few times (highlighteܫd in red) and broke above the 50-day on five major moves (highlighted in green).

When the price crosses below a moving average, it suggests that the bears are in control of the 澳洲幸运5官方开奖结果体彩网:price action and that the asset will likely continue its move lower. Conversely, a cross above a moving average suggests that the bulls are in control and that the price may continღue its move higher in tඣhe coming days or weeks.

Using Multiple Moving Averages

Many traders use moving averages to identify a current trend and as an entry and 澳洲幸运5官方开奖结果体彩网:exit strategy. One strategy relies on the crossing of two or more moving averages. This allows investors to see a lo꧅nger-term trend compared to a shorter-term moving average.

The chart above uses one long-term (50-day, shown by the orange line) and the other shorter-term (15-day, shown by the yellow line). The 50-day moving average is slower to adjust to 澳洲幸运5官方开奖结果体彩网:price changes because it uses more data points in its calculation. On the other hand, the 15-day moving average quickly responds to price changes because each value has a greater weighting in the calculation due to the relatively short 澳洲幸运5官方开奖结果体彩网:time horizon.

Investors using a cross strategy watch for the 15-day average to cross below the 50-day moving average as an entry for a 澳洲幸运5官方开奖结果体彩网:short position. Conversely, they watch for the 15-day average to cross above the 50-day moving average to enter a 澳洲幸运5官方开奖结果体彩网:long position.

Support and Resistance

Support is established when a price is trending downward. The selling pressure subsides, buyers are willing to step in, and a floor is established. Resistance happens when a price is trending upward. The buying strength diminishes, and the sellers step in, creating a ceiling. In either case, a moving average may signal an early support or 澳洲幸运5官方开奖结果体彩网:resistance level.

For example, if a stock is drifting lower in an established uptrend, it wouldn't be surprising to see the stock find support at a long-term 200-day moving average. On the other hand, if the price is trending lower, many traders will watch for the stock to bounce off the resistance of major moving averages (50-day, 100-day, 200-day SMAs).

The chart above shows GOOG ꦚwith its 200-day moving average (purple line) along with the 50 and 15-day moving averages. The price found support♈ (a bounce) off the 200-day in late September and early October of 2020.

Using the 50-day and 200-day moving averages together represents trading signals in the market. Typically, the cross of a stock's 50-day above its 200-day moving average is a major signal that the stock has begun an uptrend. The 50-day moving average for GOOG crossed above its 200-day in June of 2020. Conversely, when a stock's 50-day crosses below the 200-day moving average, this can signal a new downtrend and referred to as the 澳洲幸运5官方开奖结果体彩网:death cross.

Bottom Line

A 澳洲幸运5官方开奖结果体彩网:moving average's greatest strength is its ability to help a trader identify a current trend or spot a possible trend reversal. Moving averages help identify a level of support or resistance or act as a si꧋mple entry or exit signal.