How Do You Select a Stock Index Moving Average MA to Trade With?

A trader can choose a moving average based on the chart time-frame that he is trading: the trader might choose to use this Moving Average indicator on the minute trading charts, hourly trading charts, daily trading charts or even the weekly trading charts.

The trader can also select and choose to average the closing price, opening price or median price.

Moving average indicator is a often used indicator to measure strength of Stock Index trends. The data is precise and its output as a moving line can be customized to a Index trader's preferences.

Using the moving average is one of the basic ways to generate buy & sell signals that are used to trade in the direction of the market price trend, since the Moving Average indicator is a lagging indicator & a trend following indicator - this means that it tends to give late Stock Index entry signals as opposed to leading Index indicators. However, as a lagging Stock Index indicator it gives and generates more accurate signals & is less prone to fake out whipsaw signals compared & analyzed to leading Stock Index indicators.

Index Traders choose the moving average period to use depending on the type of Stock Index they do: short-term trading, medium-term trading & long-term trading.

Short-term trading: 10 -50 MA Period
Medium-term trading: 50 - Moving Average MA 100 Period
Long-term trading: 100 - Moving Average 200 Period

The price period in this case can be measured in minute trading charts, hourly trading charts, daily trading charts or even the weekly trading charts. For our example we will use 1H chart timeframe period.

Short-term moving averages are sensitive to price action & can spot trends signals faster than the long-term moving averages. Shorter term moving averages are also more prone to fake out whipsaw signals compared & analyzed to long-term moving averages & a trader should choose a Index price period which will generate a Index signal early but not give too many trading whipsaw signals.

Longterm moving averages help avoid Index whipsaw signals, but are slower in spotting new Index trends & trend reversals.

Because long-term moving averages calculate average using more price data, it does not reverse as fast as a short term moving average and it's slow to catch the changes in the trend. However, longer term moving average is better when the market trend stays in force for a longer time but might also give late signals.

The work of a trader is to find a moving average period that will identify trends as early as possible while the same time avoiding fake-out signals (Index whipsaw).

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How Do You Select a Stock Index Moving Average MA to Trade With?