Thread by @equialpha

Moving Averages Full guide 🧵

How to use them ? Which one is best ? What I use ?

Do retweet & like !

First let us go through 2 cases of how moving averages are used
1) For finding trend - Prices are volatile on day to day, week to week basis to smooth them MA are used . It tells clear direction of the trend without getting lost in volatility (1/n)

Look in 1 chart it's only Prices & 2nd one with only MA. Things look neat in 2nd one (2/n)

2) Support areas - Moving averages are used as support areas for adding up stock. As stock picks up trend it usually takes support in between towards the key moving averages. Example below - Deepak Nitrite taking support of 10 week EMA as it runs up

These 2 are the most important use of moving averages Now we will look at different MA and which one is best

1. Simple moving average -This is the slowest MA's. If you are using 10 day SMA then you take closing price of last 10 sessions & divide it by 10. Join the dots by line
It creates lag as it turns up/down slowly giving same weight to old & new prices which gives late signals (5/n)

2) Exponential MA - This is a faster moving average and it gives more weight to the current prices, hence they turn faster than SMA, giving signals faster.

Eg - In this pic black is SMA & blue is EMA
Look how EMA stays ahead of SMA & aligns fast with current prices (6/n)

3) Double EMA - This is more filtered form of EMA where the latest price is given double weight compared to what given in EMA . So this moves even faster than EMA. Below is EMA vs double EMA. Effectively a 5 DEMA = 10 EMA (7/n)

4) Triple EMA - Just like in DEMA the recent prices are given double weight, here it is giving triple weight, hence triple EMA below is all EMA v/s DEMA v/s TEMA High to low TEMA>DEMA & EMA

Now the question comes which MA are best ?

I will answer that in below tweets now. Do like if you like till now

Using SMA - I use 50 SMA as this is used by institutions as buying area as the stock moves ahead.

Eg Deepak Nitrite, Balaji amines, LTTS

It's always a area near to 50 SMA - not exactly the line at which insti buys. On weekly 50 day is 10 week

Using EMA - Most MA that I use is EMA

I use EMA 10/4 EMA on daily - Helps in short term trend identification and 4 EMA helps in profit booking

10/40 EMA on weekly - I use for trend following. For identification of trend and trailing the gains using 10 EMA

MA helps in understanding & identifying Trends

There is nothing like "ideal MA". Whatever works for your research and execution you can use it. For me above is working

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