Thread by @Equitymaster

What is Moving Average in Technical Analysis and why it is important to identify market trends? Our ace chartist @bbrijesh decodes the ways to implement Moving Averages. #TechnicalAnalysis

The moving average #MA is a simple technical analysis tool that smoothens the price data by creating a constantly updated average price. It can be applied on various time-frames like minutes, hours, days, weeks, months, quarters, and even years.

There are 3 types of #MA. 1) Simple Moving Average #SMA. 2) Exponential Moving Average #EMA. 3) Weighted Moving Average #WMA. The #SMA and #EMA are the widely used moving averages.

The popular moving averages' lenghts or periods are 20, 50, 100, and 200 periods on hourly, daily, and weekly charts. But should you use a default #MA?

I prefer a customized #MA on different instruments. Look at 2 charts with the same MA. On Nifty(Daily), I use 235 days #EMA which seems weird to many but it has fewer whipsaws. But the 235 #EMA on the FMCG index has many whipsaws. Tip: Always use the #MA which has fewer whipsaws

Trend Identification using #MA: 1) Bullish - When the price is trading above the #MA. 2) Bearish - When the price is trading below the #MA. Traders use multiple #MA to identify the trend.

#MA Crossover Strategy is widely used by traders. Golden Cross and Death Cross are well-know strategies. 1) Golden Cross is termed #BULLISH when the #50SMA crosses above the #200SMA. 2) Death Cross is termed #BEARISH when the #50SMA crosses below the #200SMA.

Advantages of #MA: 1) Trend identification. 2) Plotting supports and resistances. 3) Helps to ride a big trend while upgrading stop-losses at regular intervals. 4) Can use multiple #MA on multiple time frames. 5) Easy to implement.

Disadvantages of #MA: 1) Lagging indicator as confirmation of the reversal is late. 2. Confusion due to multiple #MA. 3) Whipsaws in rangebound markets. 4) Not a good indicator for reversal traders.

#MA Crossover Strategy is widely followed by traders. Golden Cross and Death Cross are well-know strategies. 1. Golden Cross is termed #BULLISH when #50SMA crosses above #200SMA. 2. Death Cross is termed #BEARISH when #50SMA crosses below #200SMA.

#Comment on your best #MA or your trading strategy using multiple #MA. To keep track of what’s happening on the charts, you can follow Brijesh on his Telegram channel t.me/FastProfitsRep… and watch his videos on eqtm.in/Jd93Z