How to Use Moving Averages to Find the Trend

If the price is above a moving average, the trend is up. If the price is below a moving average, the trend is down. However, moving averages can have different lengths (discussed shortly), so one MA may indicate an uptrend while another MA indicates a downtrend.

·  Moving averages are technical indicators that are often used by investors in the stock market.

·  A moving average represents the sum of the closing prices of a security over a set number of periods and is then divided by the total number of periods.

·  Using the 50-day and 200-day moving averages together represent powerful 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.

·  Conversely, a stock’s 50-day cross below its 200-day MA can signal a downtrend and is often called the death cross.

One sweet way to use moving averages is to help you determine the trend.

The simplest way is to just plot a single moving average on the chart.

When price action tends to stay above the moving average, it signals that price is in a general UPTREND.

If price action tends to stay below the moving average, then it indicates that it is in a DOWNTREND.