Moving Averages and the Single Moving Average

Moving Averages (MA) give us a different view of the trend of the market by smoothing out the price data and they are usually calculated by using the closing prices.

Using short length Moving Averages can give many false alarms so its imperative to use these in conjunction with other indicators.

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Using longer Moving Averages gives us the bigger picture but usually they only pick up on the big trends.

The best way to use these is to use a Moving Average that is half the length of the cycle you are looking at.

If you are studying a 30 day chart then it would be best to use a 15 day Moving Average.

Mostly traders will use a 9 and 14 day MA to enable them to spot any signals just before the market moves.

The Single Moving Average (SMA) is probably one of the most popular of the Moving Averages. The SMA gives us a signal when a stock price crosses the Moving Average (MA) line.

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* We should go long when the price crosses above the MA line from below.

* We should go short when the price crosses below the MA line from above.

And again always use the SMA with other indicators e.g. Bollinger Bands.

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