Moving average explained
I’m not a huge fan of using technical analysis to determine whether or not to invest in a stock. I like to look at the fundamentals of a company. However it is necessary to have a basic understanding of technical analysis if you ever want to be anything more than a novice stock market investor.
One of the most basic and widely used technical analysis indicator is the moving average of a company.
Here is its definition: The moving average of a company is the mean price it has ended up at over a certain period of time. The 50 day moving average for a company is the price that it has averaged over the past 50 days. The 200 day moving average for a company is the price it has averaged over the past 200 days and so on.
The moving average of a company is a great way to gage the momentum a stock has. If the 200 day moving average for a company is 25 dollars a share and it is currently trading at 35 dollars a share then the stock has been very “hot” as of late and is trading at a 25% premium to what it has averaged over the last 200 days of trading.
The moving average of a company is not rocket science, which is why it works so well and is so popular in my opinion. Almost everyone understands what it is and the use it provides those who make use of it.