Use MA to make great friends

MA, ALSO CALLED MOVING AVERAGE (HEREINAFTER REFERRED TO AS AVERAGE) REFLECTS THE AVERAGE PRICE OF STOCKS OVER A PERIOD OF TIME. For example, a stock's 5-day moving average represents the average of all closing prices over the past five days, divided by five, and reflects the average trading price on the market for these five days.

MA has two common strategies in technical analysis: using only one moving average to determine the price trend, called the Price Cross Strategy. If the stock price crosses the moving average, this is known as a “bearish price cross”, which means that a new uptrend may form; if the stock price breaks below the moving average, this is known as a “bearish price cross”, which means that a new downtrend may form.

Another, called the Average Line Cross Strategy, is generally used to compare a short cycle, such as 5 days, and a long cycle, such as 20 days, to observe market sentiment and determine entry signals. This is usually a good signal when the short-term moving average crosses the long-term moving average from the bottom up, called a “golden cross”. In contrast, when the short-term moving average falls from the top to fall through the long-term moving average, called a “dead cross,” this is often a bearish signal.

It should be noted that averages only reflect past trends and cannot simply be used to predict future trends. Other technical analysis tools are needed to analyze and make trading decisions.