Leading Stock Index Indicators

Moving Average Leading Stock Index Indicators

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

The stock indices trader can also choose to average the closing stock index price, opening stock index price or median stock index price.

Moving average stock indices indicator is a commonly used indicator to measure strength of stock indices trends. Data is precise and its output as a moving line can be customized to a stock indices trader's preferences.

Using the stock indices moving average is one of the basic ways to generate stock indices buy and sell trading signals which are used to trade in direction of the trend, since the Moving Average indicator is a lagging indicator & a stock indices trend following technical indicator - this means that it will tend to give late stock indices entry signals as opposed to leading stock indices indicators. However, as a lagging stock indices indicator it gives more accurate stock indices signals and is less prone to whipsaws compared to leading stock index technical indicators.

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

• Short-term stock indices trading: 10 - 50 MA Period
• Medium-term stock indices trading: 50 - 100 MA Period
• Long-term stock indices trading: 100 - 200 MA Period

The stock index price period in this case can be measured in minute charts, hourly charts, day stock indices charts or even weekly stock indices charts. For our example we will use 1 hour stock indices chart time frame period.

Short term stock indices moving averages are sensitive to stock index price action and can spot stock indices trends signals faster than the long term moving averages. Shorter term stock indices moving averages are also more prone to whipsaws compared to long term moving averages and a trader should choose a stock index price period that will generate a stock indices signal early but not give too many stock indices whipsaws.

Long term stock indices moving averages help avoid stock indices whipsaws, but are slower in spotting new stock indices trends and trend reversals.

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

The work of a trader is to find a moving average period which will spot stock indices trends as early as possible while at the same time avoiding fake-out signals (stock indices whipsaws).