Terminology - Share Market
What's a Moving Average?
A simple moving average (SMA) indicates the
average value of an asset's price - a stock, commodity or index etc -over a set
time frame - 15, 50, 100 or 200 straight days
HOW DO ANALYSTS READ THE 200-DMA..?
When an index or a stock closes below the 200 - DMA,
it is said to be in a long-term down trend until it breaks out above the
average.
This means a new buyer of the index or share is
willing to pay less than the average price paid in the last 200 consecutive days.
When it trades above the 200 DMA it is in a long-term uptrend.
Technical analysts usually wait for 3 to 5
straight days of a shares's or / an index's closing below or above the 200 - DMA
to conclude a trend.
WHAT DOES A FALL BELOW THE 200 - DMA MEAN?
The 200-DMA acts a major support in a bull market
& as a major resistance in a bear market. Since it is a long-term average,
it helps an investor who holds significant stock portfolios with a long-term
outlook.
When a market conclusively breaks below or / out
of its long-term average, it provides a signal to the investor to either buy or
/ sell.
About 200 trading days exist in a year after
deducting weekends & holidays.
Src: ET
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