If you are relatively new to the world of trading stocks and shares, then you may not yet be aware of the importance of the 200-day moving average in managing your stocks. Used by many traders to measure the amount of fluctuation in a share price, this can give you a much better idea of how the stocks will move on a monthly basis, rather than being influenced by daily or weekly shifts. Learning about this moving average, and how you can use it to be a better trader and stock analyst, will help you to keep your investments safe.
Understanding the 200-day moving average
The moving average, sometimes called the 200 day simple moving average, or SMA, is used to describe a stock in the last 40 trading weeks. This is then used to work out a general trend in the market. If the price of the stock keeps above this SMA, then that is considered an uptrend. It may be used in conjunction with the 255-day SMA, which represents a single year, or you may combine it with shorter averages to work out whether there is any significant movement in a single market. Although you could use any indicator, from 30 to 100, most experts consider that the 200 SMA is the perfect point between discovering a trend, and raising a false alarm.
Using the SMA as an indicator
The best way to make use of the 200 day SMA is not as a definitive mark in the trading item, whether that is the Dow itself or some specific market, but as a guide to alert you that something is happening. If you notice a distinctive change, for example a rise or fall of more than 5%, then you should start to pay more attention to that stock. It might be nothing, and you won’t know until you look at an SMA for more than a year, but keeping an eye on the 200 day mark will give you some indication of what is happening.
A long-term trend?
The key to keeping an eye on your stocks is to be aware of any long-term trends. Most commentators tend to rely upon the 200-day SMA as the indicator of movement in the market. Above the trend might be a bullish market, but falling below that can quickly mark the stock as bearish. For example, following the rule would have allowed you to back out of the 2008 crash, keeping your investments safe, and would also have alerted you to the problems in 2011. Therefore, it is a very useful tool when you are trying to buck the trends on the stock market and keep yourself safe. By following the financial trends revealed in the moving average, you can pick up or put down stock as the graph indicates, and you can also use it as an alert system, sending you to your investments in order to keep a closer eye on the market.
Keep up with the trends
If you have decided that the best way to safeguard your investments is to follow the 200-day SMA, and move stocks when they start to move below that line, then you need as many helpful tools and guides as possible. Having charts, and listening to the advice of successful stockholders, can ensure that you get the best results from your stock market investment. With help from successful investors, you can learn how to make the SMA calculations a part of your general investment strategy, and become more successful in your stock market investments.
Learn from the best
When you start out as an investor, you need the help of people that have experience in trading, and can help you to get what you need from your regular investments. For example, making use of Dan Sullivan and The Chartist will give you regular information about how to manage your investments and make more of the stock you buy. As a recognized investor, Dan believes in living his theories by putting his own money on the line. That way, he keeps in touch with investors, and manages his stock alongside his readers. Not only does he believe in keeping his feet on the ground with regular investments, but he also follows a program that might seem to go against your investment instincts. Rather than simply waiting for stock to fall, and then selling it at a better price, he believes that the best system is to buy stocks while they are rising above their 200-day SMA, and sell them while they are still rising. This is a hard thing to learn, but if you can do it, you stand to see great returns on your investments. You can learn more about this strategy, and more, by ordering The Chartist today, or by contacting the team by calling (800) 942-4278 now.