Moving average is a widely-used technical analysis indicator. Different systems and school of thoughts use different days moving average, but the more commonly used ones are 20, 50 and 200 days.
Statistical studies and academic research showed that MA is useful in identifying reversal of trend and serve as a strong support or resistance for stock price. 20 and 50 day MA signifies short term trend of the market while 200 days represent mega trend that could last a few years. I have also heard some experts shared that investing based on MA analysis has the highest statistics probability of profits among all the technical indicators.
This is where many layman investors have big time misconception about MA and the problem lies in mixing up on the causal relationship between stock price and its MA.
If we dive deep into the mechanism of MA, we will know that it is ...
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