MAcrossover
This strategy uses the Moving Average, enter a trade when the Moving Average falls below the current price average and exit a trade when the Moving Average is above the current price average.
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This strategy uses the Moving Average, enter a trade when the Moving Average falls below the current price average and exit a trade when the Moving Average is above the current price average.
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A helps cut down the amount of "Noise" on a price chart. Look at the direction of the moving average to get a basic idea of which way the price is moving. If it is angled up, the price is moving up (or was recent) overall; angled down, and the price is moving down overall; moving sideways, and the price is likely in a range. A moving average can also act as support or resistance. In an uptrend, a 50-day, 100-day, or 200-day moving average may act as a support level, as shown in the figure below. This is because the average acts like a floor (support), so the price bounces up off of it. In a downtrend, a moving average may act as resistance; like a ceiling, the price hits the level and then starts to drop again.
The price won't always "Respect" the moving average in this way. The price may run through it slightly or stop and reverse prior to reaching it.
As a general guideline, if the price is above a moving average, the trend is up. If the price is below a moving average, the trend is down. However, moving averages can have different lengths (discussed shortly), so one MA may indicate an uptrend while another MA indicates a downtrend.