Strength of Moving Average (MA)

Moving Averages (MA) in the Stock Market is referred as the average of prices for a certain period which gives an indication of price movement in the future. MA can be calculated in many ways like Exponential Moving Average, Simple Moving Average, Linear Moving Average, Etc.

Moving average in stock market can be calculated based on four type of prices which are as follows -

1. Open Price (Average calculated on the basis of Open Price of a Stock)
2. Low Price (Average calculated on the basis of Low Price of a Stock)
3. High Price (Average calculated on the basis of High Price of a Stock)
4. Close Price (Average calculated on the basis of Closing Price of a Stock)

It is further calculated for different time frames such as MA of 5 minutes, 15 minutes, 1 hour, 2 hour, 1 Day, 1 Week or 1 Month, etc.

Averages are really powerful and works almost with accuracy and consistency in measuring the performance and while taking investment decisions. It is like averages of Cricketer used to measure how much they score on an average basis. It refers to how a cricketer often scores but it does not hit exactly same as average every time. This is an opportunity in the share market when a stock is performing well and reaching near or crossing it's 50 days or 100 days Moving average. Here, we have opportunity to invest in strong company's based on prices compared with moving averages.

Majority of the Traders and Investors uses two type of MA which is Exponential Moving Average (EMA) and Simple Moving Average (SMA). 

Exponential Moving Average is like simple moving average which helps in measuring price trend of any security. On the other hand, Simple Moving Average (SMA) is just an average of price which is also popularly know as DMA (Daily Moving Average) when calculated at one day interval.

There are many Indicators, Strategies are available through various software and application which can give an opportunity for a directional trade but this simple calculated figure of statistics is really magical and powerful when it is about directional move.

There are very low chances when a stock deviates from it Moving Averages and when it deviates due to strong moves, it gives an opportunity to investors and traders to enter and gain.

A command of Moving Averages and it's functionality is an essential skill required to any investor and trader to be successful in his trades.

There are various resources available on the internet to study and to understand the concept of Moving Averages.

Happy Learning !!!