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How Moving Averages Help to Identify the Trend in Market?

Posted By On 6/15/2009 06:09:00 PM Under

1. Moving averages helps to follow the price movement which in turn helps to get a clear trend picture as volatile spikes are ruled out in this plotting. One is able to get a current trend as minimum two moving averages are plotted on the chart. One has to just keep a watch that when a crossover occurs, meaning the shorter time period moving average crosses over the longer time period, it often indicates that a change in trend has occurred. To get an idea of a trend reversal one can plot 50 DMA and 200 DMA.

2. One just needs to keep an eye on 50DMA crossing over 200 DMA and one can be sure that the trend is going to get reversed towards the upside. If we see now a number of world indices 50 DMA are crucially poised to cross over the 200 DMA implying that the reversal may be offing in the economy and same may be attributed to a number of financial stimulus packages.
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